tired of making deposits into your trading account,
instead of TAKING withdrawals?
After 20 years of trading, the question kept getting louder and louder.
If today’s trader has access to more technology, more charting solutions and more information than any point in history – why aren’t those advantages translating into more money?
AFTER YEARS OF STRUGGLE, I FINALLY ADMITTED THAT CHART READING IS A USER MANUAL WITH MISSING PAGES.
This case study examines why the modern trader is underachieving and introduces the obvious solution, found in the least likely of places…
What separates this information is that it’s based on real people. Real people, real money, real traders. Traders just like yourself. The lessons were experienced through my own eyes.
This isn’t a research report. It’s a story; a story about you with an unfinished ending.
Twenty years of experience gives me a unique insight into why some some traders finally break through to six-figures and more. My career as a proprietary trader, mentor, owning two trading firms in NYC, and my ten years as a trading educator, is now in your hands.
I’ve worked with complete newbies scared to place an order, and those earning a reliable million dollars per year. There’s nothing I haven’t seen or done, and the biggest lesson I learned is that working myself to the bone, wasn’t the answer.
Join me today, and eliminate years of searching for a Holy Grail that doesn’t exist, and see why it isn’t necessary for massive success.
Today is the day when you'll understand that chart reading is a different skill than getting paid.
You'll finally see how to build and argument for great trades.
This is the day you'll know what it really means to be a trader.
To The Modern Chart Reader
You know everyone thinks we’re crazy, right?
To most of the world, trading is a joke.
Trading isn’t a career. It's not a real job. You'll never have security.
It’s a hobby, a diversion, a phase that’ll come and go. Sure, you can get licensed, but don’t count on that to make you any money. That’s no guarantee.
Try telling your family or friends or coworkers you want to quit your job and make money trading. They’ll smile politely and ask, “Does anybody really make money from that?”
Yes, they want you to have dreams. And, they want you to chase them. Of course, they want you to succeed.
But they also want you to be “realistic.”
If you really want to improve your life, you should go to college, buy a franchise, or even go into sales, not hang all your hopes and dreams on the market. Nobody can make money trading.
The Traders Path
My journey wasn’t easy, but my goal is to make yours so. The losses, the challenges and the lessons were expensive. Time was easily the greatest expense.
I hope that my payments to the market Gods become your rewards.
Through my passion, my empathy and my experience, I seek to crunch the cost and time of your learning curve by 200%.
Your greatest obstacle as you journey the traders path is the truth. I have mentored traders since 2003 and the main reason most remain amateurs, is a reluctance to admit where they are starting.
A denial about their resources is the main culprit.
This journey is not just about risk capital. It’s about “screen time,” how much you already have and how much you plan to give.
This is about risk tolerance, previous education, and investing in continuing education. It’s about having an open mind to learn from mistakes.
The market gives us valuable feedback. Most don’t listen until its too late. Through these pages I will show you the brilliant simplicity of tape reading. The tape knows everything. It’s never wrong. If you’re struggling, the tape will show you what’s missing.
The only barrier between you and anything a trader could desire is one simple fact: Your trading today is the result of what you see, not what you know. Something so important yet misunderstood.
We spend our days searching for the one thing that’s missing. But everything we tried fell short. And so we buy another book or read another blog, or even attempt to see a trading psychologist! Some finally give up and doubt it’s possible.
The answer you seek, the great mystery, is to simply understand what’s on the tape.
The Learning Curve
Feeling Close for Six Months
June 16, 2000 felt like Groundhog Day.
Another break-even, boom or bust week of trading. It’s Friday afternoon and I’m exhausted. Maybe my Dad was right, maybe it’s time to grow up, and maybe I should finish that resume. My feet are on auto-pilot and take me to Borders Books on 7th Avenue next to Penn Station. “Here we go again, I whispered, another cappuccino seminar at the bookstore.”
At this point I was trading for six months. Every day I felt close, but I just couldn’t get past break-even. I knew how to read charts. I was actually pretty good but every day at 5 pm I said the same thing, “I just need a system. It’s the only thing standing in my way of making steady money.”
I'm a hard worker. Each night, I scan hundreds of charts. I know I can do this. I just need a system.
All trading books preach paying your dues. They call it trader tuition. I paid with losses, I paid with time and I paid with stress. Nothing gave me a return on investment.
Working harder made me feel good, but it wasn’t the answer. One day sitting at Starbucks, I finally found a clue. It was the one thing I wasn’t doing. I wasn’t paying attention.
This is the quote that popped out of my notes:
Did you get that? You begin to learn!
The clouds vanished and the birds began to sing. That's when I knew there was nothing wrong with me. I simply needed to pay better attention to what worked and what didn’t.
I just need to be disciplined...
Stopped Out: How being Disciplined Almost Ruined Me
Discipline is good, discipline is smart, discipline nearly drained my account. Get a plan! You need a trading plan! My trading plan was a recipe for getting stopped out of every trade. I guess this is what a punching bag feels like. I’m following the “rules,” but I’m still losing money.
My friend Bobby who was a NASDAQ market maker for First Boston gave me a clue.
He said “It’s trade management not trade predictions. Learn to work the order a little but be disciplined in your risk management. Never lose more than you planned, but don’t be stubborn with your entries or you’ll drive yourself crazy and get stopped out of every trade.
As long as the tape is obvious, work the order. My institutional clients scale in and scale out, learn to do the same “
Bar-by-bar I reviewed the trades. They all look good but I didn’t understand what Bobby meant by an obvious tape. At this point I wasn’t losing much money. I stopped the bleeding by doing less of the stupid stuff, but commissions, software fees and small losses slowly drained my account.
Discipline helped. But it wasn’t the answer. I became very disciplined at taking losses… Something was still missing. I needed a few big winners to pay for all those small losses.
How a $795.67 Profit Can Make You Feel like an Underachieving Loser
Finally. A profit three times my accepted loss per trade.
I can super-size my lunch today! Self-confident isn’t the right description as I strutted my way to Angelos Deli on 42nd. It was more like relief. Looks like ol’ Pete has this trading thing all figured out. Paid my dues and all that stuff.
Imagine getting back to the office and step in my shoes…
You're back to the desk, light up the screens, log in and see your stock is now $1.83 higher than when you sold it. First thought – great, I just left almost $2,000 on the table - as your hand tries to squeeze the mouse into a million tiny pieces.
You didn’t miss the trade. As a matter of fact, it was a great idea. The stock did exactly what you expected. You just, well, blew it by cutting your profits short. You’re booking too soon because you’re afraid to give back P&L. You're afraid because you need the money.
You’re getting better but you feel worse. It doesn’t make sense but it’s the truth. You decide to go to the gym because a workout helps you think better...
Tape Reading and Bigger Wins
New traders sweat the losses. Newbies need each trade to make money. We need it to validate what we learned and to prove that our system “works.” Every losing trade chips away at our idealized vision of trading for a living. Losses to a new trader speed up the dreaded clock that ticks faster and faster towards getting a “real job.”
To a trader beyond break-even, but not yet six-figures, winning trades can be your ultimate doom. It’s worse than losing money because you’re too far into it to quit, but too far away from earning a real living. You’re in the game, performing OK, but you’re underachieving.
The burning question is "How do I know when to hold winners? Better yet, how do I know when to add to winners? Is that my problem? Maybe I need to add more often to winners. That’s what the big traders in my office do”
TAPE READING RESULTS
Building Positions like Andy and Marc
The big traders always add to winning trades. Maybe that’s the answer.
I could see their positions. The light blinks and my computer beeps. There was one trader who stood head and shoulders above the rest. He wasn’t well known outside the industry but he was THE MAN. I sat at his desk for two mornings as a favor to a friend.
I wrote ten pages of notes but he moved so fast on the keyboard I couldn’t tell what he was trading. When I first met Marc he had two things on his charts. Candlesticks and volume. Nothing else.
My monitors looked like something from NASA. I think at one point I tried every indicator imaginable.
It was like speaking a new language. “Stochastics, fibonacci, Elliot Wave, GANN and MACD…” I sounded great at Thanksgiving, but when my brother started talking about getting a raise plus a bonus, I went in the other room to watch football.
I was happy for him but I didn’t want to be a part of the conversation. If we calculated my pay by the hour it would have been embarrassing.
Andy was a little different. He was calm. You never knew if he was up huge or down huge. A true professional. Andy was a “relative strength” trader. He had big positions on both sides of the tape. Marc was “long only.” It was rare to see him short He once told me that if a stock traded lower in a $7 down trend, he was long the $1 rally…
The common trait between them was adding to winners. Marc said he always pressed his winners. After getting to know him, there’s no doubt this is what made him great. Andy too. Success leaves clues. It didn’t take long for me to test my new theory. I was winning more often than not and a profitable trade unfolded the next day.
All systems were a go.
The winning trade paused and gave me a second entry. I followed best practices and added less shares than my original entry. Here we go. The trade looked good, today’s trend was solid and the stock had above average volume. I have every reason to feel good about adding to my position.
The stock started pulling back, no big deal, that’s expected. Stocks don’t go straight up or down. Candlesticks on my 15 minute chart turned red. Institutional supply was now stronger than when I entered. No big deal I thought, this is how Andy and Marc make big money so I needed to stay the course.
Add to winners, that was the plan.
The stock pulled back to my entry point. Trade over, I took a “flat” on my first entry, and lost money on my second. I needed to ask Marc what I did wrong. Reading my journal and feeling these emotions again I don’t think I was angry. It was more of a feeling of doubt. I’m a rational person but I was starting to doubt I could do it.
At this point I knew virtually everything there was about chart reading. I wasn’t losing money but I couldn’t get paid. I believed in my heart I could do it, but at some point you need proof. Hope doesn’t pay the bills. Every day in every way I felt like I was just “one thing” away from my dreams.
The Question I Didn't Expect
When I tracked Marc down, I asked if I could buy him lunch in exchange for picking his brain. We walked past the New York Stock Exchange on the way to get chicken parm heroes. He took me to a place that was downstairs, it had one oven and 3 tables. Only in NYC would someone open a food joint in about 300 square feet of space.
I explained the trade and here was his answer:
You’re right I’m always pushing my winners. Then he asked me a question I didn’t expect.
“How long has the stock been “well-bid?”
How long have institutions supported the bid? And how many days in a row was this the case?
Modern tape reading is about order flow and knowing your saturation points. Those two criteria dictate your trade management.
When you know how to read the tape, you know how to manage the trade— before you enter.
TAPE READING RESULTS
Why Most Chart Readers Struggle and Fail
Chart readers never fully grasp what they see which is why they never get past break-even. They go in circles for years looking for an answer that’s staring them in the face.
Chart reading is analysis. Tape reading is the money.
In the long-run, our edge is order flow but in the short-term stocks trade around saturation points. Areas where you can expect buying or selling to start or stop.
The closer your stock gets to a saturation point, you shouldn’t add more shares. The likelihood of follow through is lower, so you don’t add. It’s still a good long because you’re trading with the order flow, but it’s more of a cash flow play.
So we’re trading with the order flow, but trading around saturation points. I only add when my stocks are close to the value areas. If you can’t see these points on the tape, you’ll end up making too many break-even trades..
Break-even trades make break-even traders.
This is why a lower open in a strong stock is a great play. The opening price action is further from the saturation point, so your profit potential increases.
It sounds like you added to a stock later in the cycle that you shouldn’t have added. You need to know your saturation points to set the trade expectation. A good place to start is with your stock’s average true range.
The big picture was starting to get clear…
Chart Reading is a User Manual with Missing Pages
When we begin, trading seems so easy. Read the charts and place a trade. Take a profit, take a loss and move to the next trade.
It doesn’t take long to be a master chart reader, maybe a month if you work hard. Looking back, that should’ve been a screaming red flag, but it wasn’t. We choose to ignore how fast we “mastered” trading.
The market quickly teaches what we don’t know, and it’s lessons are expensive. We hold losers too long and we hope.
Hope doesn’t work. This translates into lost opportunity. So we freeze and do nothing. This saps our confidence for the next trade.
We hesitate on entries and hesitate on exits. We no longer trust the charts. Suddenly each bull flag looks different because the previous one lost money.
The Unpleasant Reality of a HARD WORKING but Broke Trader
We minimize losses but it’s not enough. Losing less, is different than making more. To pay for the losses we need to press our winners. The problem is we don’t know how.
A part-time job is looking more-and-more likely. It’s the right thing to do, but would be a blow to our ego, and all hard work. It sucks, but maybe driving a limo won’t be so bad.
We make one last attempt to turn the corner. We try to hold longer, trade bigger, trade multiple positions and add to winners…
All sound tactics in search of a strategy. When to apply them, was still missing. Chart reading is a user manual, with missing pages.
A strong desire to rehash information cycles through our head. This ends with us talking to ourselves. But we can’t answer the question. Because we don’t have all the variables.
We blame our discipline because we know everything, but we can’t get paid. The fact is, we’re right. We know everything about charting, but we don’t know how to make money.
Boom or bust. Make money three days in a row, give it all back on the fourth. We get lost in constant planning and develop an obsession for clues.
At this point we almost know too much. We deeply believe we are only “one thing” away. One tool, one indicator or one book. We scour hundreds of charts each night but the results are the same-we have mastered the art of not losing money.
You've Paid Your Dues
If you’ve had a similar experience and made it this far, congratulations. Most people give up. All billionaires say you need to love what you do. Most people don’t understand the concept.
You need to be crazy in love with the idea, with the possibilities, crazy enough to think differently. So crazy that you believe in yourself, no matter how many obstacles.
So crazy you never give up the search.
You need to love what you do so that you put in the hours and it feels like minutes. I can’t tell you how many nights I looked up and said, “wow, it’s dark out…”
Today you have a choice. Are you open to a new way? Or will you continue paying to get the same results?
When you’re ready, that quiet voice inside whispers “take one more step”. It’s not magic but you finally see what to do. You finally see it’s possible, you finally see chart reading is only the first step.
Making money requires an edge. An edge that becomes your strategy, and your strategy becomes what you believe in. It requires a belief in something we can’t control. A belief in probabilities.
But what causes probabilities to work? What makes you trust and follow your edge? How does an edge make you money?
Let’s take the next step and find out…
Lessons In Reading the Tape
Essentially we stalk price and volume over a 2 - 6 day period. The goal is to identify when institutions are active, and when they step aside. It’s not dependent on the longer term bias, it’s pure tape reading over that short window.
As the market alternates between buying and selling pressure, our objective is to enter as this pressure “saturates” in a value area to buy, and “saturates” in a profit taking area to sell or sell short.
When the market opens, we monitor three specific levels that determine today’s tape. Once the strategy is locked in, the trader will always know what to expect. The most powerful aspect of the trade is anticipating the opening price action. We know exactly what to expect the first 90 minutes, and the correct levels to trade.
Each day we plan ten to fifteen trades. We only need two or three to unfold as planned, to make consistent money. Many amateur traders believe the opening hour is confusing, and too volatile to interpret. The Saturation Play gives traders confidence on the open, because when the “expected” happens, they literally planned for it.
The system makes money over time, so you can’t cherry-pick the winners.
Trading doesn’t work if you only take some of the signals.. Once a trader gets used to this game plan, it’s actually easier to manage five positions than one. You aren’t watching every up-tick or down-tick. You manage the aggregate of the positions. The only way a trader gets in trouble, is if he doesn’t exit the losers.
TAPE READING RESULTS
Building a Profitable System on Simple Math
The Origins of Ten Perfect Trades
Everything starts with stocks that close in the top or bottom ten percent of the range. These setups have a 90% chance of following through in the same direction the next morning. But, they have only a 50% chance of closing above the previous day’s high (for a long), or below for a weak close.
Put simply, a strong close with a higher opening has a 50% probability of failing, when combined with the Saturation Play setup. The trigger without the setup is worthless. When you add the entry criteria, the trade is a thing of beauty.
Saturation Plays are designed to capture the move from the low to the high, or from the high to the low. The key to the trade is knowing whether or not you should expect the high or low to be made first each morning.
Once you know the setup, the opening play and the projected entry price, the trade is just a matter of placing limit orders at the correct price to begin working the trade.
The secret to the play is defining your bias and never deviating. You can’t fight the tape. There are day the momentum runs longer than usual, but it simply sets up the same trade the next day. Take your accepted loss and move on with your day.
You come into the day as a buyer, seller, or looking for a short sale. You don’t flip-flop during the day.
Best case scenario is to hold to the close, but truth be told, when you have multiple positions that are profitable all at once, your P&L can explode pretty quickly, it can be hard not to book profits.
We need to add some element that tells us when to get aggressive with our hold time, and when to exit into momentum.
How Tape Readers See What Chart Readers Don't
Order flow isn’t discussed on CNBC or penned in the Wall St Journal…
Big money doesn’t advertise…
Or do they?
A trader I worked with, Jim D., had the answer - "If I had a natural buyer with size behind it, we tested the market to gauge interest.”
“If my buyer wants to build a position, we shook the tree, to bring out sellers. We sold stock to stimulate selling. My client sat on the bid buying more than they sold.
To attract buyers, the process was similar.
The public is attracted by higher prices. More specifically, fast-moving higher prices. Chart readers see higher prices with wide fluctuations, after a significant move higher.
The “fluctuations” give retail buyers a second chance at a better price.
So we are clear, a “sloppy/whippy” topping pattern (after a mark up/up trend), is when institutions are marketing stock for sale. They are telling you they need to get out.
Institutions Marketing Stocks for Sale: Order Flow on the Tape
== >> The beginning of the mark up is orderly. Not attracting attention yet.
== >> Just prior to “A” the first attempt to market stock for sale is completed in a $4 trading range. Price falls quickly during the few days of “A” but there is too much stock for sale. We need higher prices and more “second chances” to get a hot stock at a better price. Think of spot “A” as the movie preview. It gets your interest in things to come.
== >>Area “B” is the marketing machine at it’s best. New high prices that violently decline and give you another chance to buy. The wider the swings, the more attempts at a new high, the more lemmings drawn to the buy button before the coming decline.
Is that legal?
Yes. It’s just institutions marketing what they need you to see and believe.
Big money can’t buy or exit large positions without your help.
Tape readers see distribution.
Chart readers see “action.”
Order Flow = The Smart Money
What exactly are Institutions?” In trading terms, I’m talking about major financial institutions. Hedge funds, mutual funds, pension funds, the big players who need to earn returns to keep their jobs.
These players account for an estimated 67% of the volume in the stock market on any given day. Smart traders benefit by tracking their order flow.
The term order flow comes from market makers and specialists receiving large orders to work. The better price they got for the order, the more order flow they got. The more order flow, the more they made in commissions.
Tape Reading in the Age of Algorithms
Struggling chart readers like to blame the “algos.”
They complain about getting stopped out by three cents, only to watch the stock march higher without them. Eventually they believe algos are out to get them. The book “Flash Boys” by Michael Lewis does a great job perpetuating the anger.
Narrow-minded people, only see where they focus. They forget when order flow is obvious, and algos catapult the stock so high, so fast you can’t possibly mess up the buying opportunity.
If I have a choice between a bunch of annoying small losses, versus a tsunami of buying (or selling), sign me up. Tape reading and seeing order flow, solves the algo crisis.
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Foundations in Tape Reading: The core principles behind price action, volume and what happens between entry and exit. Reading the tape is the missing link for struggling charts readers who know everything, but can't make a dime. Experience what it feels like to wake up each day EXPECTING to get paid.
Foundations in Tape Reading ($99 Value)
How Winning Traders Think: A life-changing report inspired from the days I owned my trading firm in NYC. The mental aspect of trading separates those who shine from those who crumble at the first sign of adversity. Learn what it takes to maintain absolute confidence fueled by a burning desire.
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The Taylor Notes: Inspired by a rare book written in 1955 by a grain trader in Chicago. The technique drove me to develop reliable tape reading principles that have generated a small fortune. The notes focus on mastering price action on a day-by-day basis and developing the skills to forecast the next day of trading.
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FROM THE COMMUNITY
N. Gordon -FL
I know the market has been very volatile and like you said, if you haven’t been making money the last few months, you’re doing something wrong and need to get in the program. I’m so unbelievably happy I did. Yesterday was the first day my account was positive in the 3 months I’ve been trading. I started yesterday at 42k, went up 10% yesterday, closed at 47k. Today another 25%, it just hit 62.5k. 15k just today, I’m honestly almost in shock, I really can’t begin to explain my appreciation for all the help and knowledge.
K. Reed -NYC
I value and read your daily e-mails and am semi-actively trading. I am writing as a testament to your strategy and advice. I had great success trading order flow, specifically using inside candle, ATR, patience and NOT trading unless it was a best idea.
I will continue this strategy with journaling added. I hope all of your students and followers can understand your commitment, knowledge and have the will to stick with it.
J. Williams -FL
I hear your voice in the back of my head.
The first trade I got in there was an obvious exit, it was at $2600, then the swing low I got in and I'm up to $2000, $3000. I wanted to get out because of the dollar amount but I hear your in the back of my head that there's no reason to get out, I'm not seeing any exit signals. I kept waiting and it turned into a $5000 trade.
Before the course, I would put on a trade and just wishfully think it would go a certain way. I really didn't know what I was looking at. Now, I know what to look for.
For access to the Order Flow Masterclass home study collection, please see the 30 Day Boot Camp.