An Insider’s Advice on Tape Reading

by David Jenyns on September 12, 2007

Many people attempt to trade in the stock market with limited or no information, and invariably these people drop off the practice like flies. In order to successfully trade, one must — emphasize must! — educate himself first. The novice trader who wanders onto the market, newspaper in hand and bewildered look on his face, will quickly be devoured by the wolves who make their living there.

It will doubtless be found that what is one man’s meat is another’s poison, and that no amount of “book learning” will be of any use if the student does not put his knowledge to an actual test in the market.

It is surprising how a familiarity with subjects relative to the stock market, but seemingly having no bearing upon tape reading, will lead to opportunities or aid in making deductions.

Here are a few pieces of advice that will get the novice tape reader on his way to developing a successful style:

1. Read everything you can get hold of. If you find but a single idea in a publication it is well worth the time and money spent in procuring and studying it.

2. Wall Street is crowded with men who are there in the hope of making money, but who cannot be persuaded to look at the proposition from a practical business standpoint.

Least of all will they study it, for this means long hours of hard work, and Mr. Speculator is laziness personified. Frequently I have met those who pin their faith to some one point, such as the volumes up or down, and call it tape reading.

Others, unconsciously trading on mechanical indications such as charts, pretend to be reading the market.

Then there is a class of people who read the tape with their tongues, calling off each transaction, a certain accent on the higher or lower quotations indicating whether they are bullish or bearish. These and others in their class are merely operating on the superficial. If they would spend the same five or six hours a day (which they now practically waste) in close study of the business of speculation, the result in dollars would be more gratifying at the end of the year. As it is, the majority of them are now losing money.

It is a source of satisfaction, however, that these suggestions of mine which, I believe, are the first practical articles ever written on the subject of tape reading, have stirred the minds of many people to the possibilities in the line of scientific speculation.

This is shown in a number of letters I’ve received, many of them from traders situated in remote localities. In the main, the writers, who are now carrying on long distance operations for the big swings are desirous of testing their ability as tape readers. No doubt those who have written represent but a small percentage of the number who are thus inclined.

To all such persons I would say you can make a success of tape reading but you must acquire a broad fundamental knowledge of the market. A professional singer who was recently called upon to advise a young aspirant said:

“One must become a ‘personality’ — that is, an intelligence developed by the study of many things besides music”.

It is not enough to know a few of the underlying principles; one must have a deep understanding. To be sure, it is possible for a person to take a number of the “tricks of the trade” herein mentioned and trade successfully on these alone, but surrounding oneself with as much knowledge as possible will practically guarantee greater success. As the saying goes: Knowledge is power, and that is no less true in the business of trading stock.

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