Mover Mike

The Trader’s Blog today sure brings back memories. The latest post is titled Tape Reading written By Kunal Vakil, co-founder of http://www.mysmp.com/

The Tape shows time and sales of all stocks on the NYSE, for example, or in this case just the time and sales of a particular stock you want to day trade.

According to Vakil the Tape will show you:
Size of Orders - are they 100s and 200s or thousands?
Order Speed - are they trading every few minutes or coming rapidly?
Order Condition - are they hitting the bid or taking out the offer side?

Vakil offers his experience to help you read the tape and trade successfully.

When I started as a stockbroker, all NYSE brokerage firms had a ticker or tape. It could be seen from everywhere in the office. Prior to my getting registered, there used to be board markers who listed the last trades on big chalk boards. The electronic tapes replaced that.

My desk at Walston and Company faced the tape as all other desks did. Lani Louie worked in the office near me and she had an uncanny ability to watch the tape and, based on what she saw, either buy or sell and was very successful at it.

We had the same men come in each day and sit in the chairs under the tape. We called them “sitters and spitters.” They would cheer every uptick or moan every downtick. Often they would read the Dow Jones News Wire for news and then rush to their broker to buy or sell. If they were excited about the news they would buy and if the news was bad they sold. Hence, I learned to do the opposite: sell the good news, buy the bad. I also learned to never believe anything until it was officially denied.

There were some brokers that did nothing but watch the tape. I was taught to pick up the phone andf orget about the tape. It wouldn’t make me any money. I didn’t have any and I didn’t have any customers yet.

There were times when I was so absorbed in my cold calls that the board room or bull pen just faded into the background. The tape was slow. The NYSE only traded about 2 million shares an hour or a day, I can’t remember. Volume picked up in the 70s, to the point when we had to close on Wednesdays each week to take care of the paperwork. Once in awhile while I was lost in my cold calling, I would sense a change. I would look up at the tape and discover the tape was running late and we were having a bad day. The tape was more of a thermometer for me, measuring the excitement.

When the quote machines came into our offices, we spent our time punching up quotes. I became addicted to movement. It was a boring day if the market and stocks were unchanged. I don’t know how I would react to todays volatility.

Alot has changed since those days. I was a “stock jockey.” I made my living recommending stocks and bonds and building positions in undervalued securities. I was there when Computer Science had convertible bonds that yielded 30%. They were bonds with 6% coupons selling for 20% of face. Not only were the bonds interest good, but they went back to par. I remember during the Carter or early Reagan years when I could buy Pacific Power 1st mortgage bonds yielding 18% at par, or Oregon State 13% non callable munis at par.

Now brokers are asset gatherers for the most part, and someone else manages the money. Would I go back? No, the crash of 1987 still gives me nightmares.

Tags: Investing //
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