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The Power of the Tape (AAPL)

with trading, there is a misconception out there that it HAS TO MAKE SENSE. That every little tick on the ticker board or every little news feed stemmed from a company’s action, rumors, etc. has to all make sense accordingly to the stock’s price. 90 percent of market participants wake up to the sound of their alarm clock with the intention of making money. But the sad truth  is that only 10 percent if not less will do so on a consistent basis. Is that because those 10 percent or less were born to do this? No! Is that because those 10 percent or less were somehow wired to do this kind of work? Maybe! Is that because those 10 percent or less were lucky? Maybe! Or is that because those percent or less, sacrificed the ever-lasting habit of persistence combined with time to perfect the craft of trading by making mistakes over and over and over again until they learned to develop certain habits that will pertain to success in trading? Yes, that is exactly it. In any craft you do, sure there are the people that just have a god-giving talent and have the ability to do it with less effort, sure there are those people that may be luckier at times, but the ultimate separation between the winners and losers (in any craft) comes down to having a burning desire to succeed without the option of failure in mind. And also remembering that hard work does not guarantee success but smart work, just like knowledge is not power but specialized knowledge is. I will elaborate… lets say you have an achievement that you are setting out to achieve. While, you may put hours in and out everyday that does not mean you will succeed because although you may be working hard, you also very well may not be getting the right return for that work. See I like to think of it as the alpha or return I receive back on the time I spent on something. I will give you a prime example of what I mean: About two weeks ago I was reviewing my trades for the past couple of months or so and found some interesting patterns. One of them being that most of the profits I made came from trading AAPL. Likewise, that taking overnighters did not necessarily bring me gains, and that earning plays were terribly rewarding. So what did I decide to do? eliminate the focus I had inputed previously on the stocks that were not profitable, stop taking overnighters, and stop trading earning plays. The funny thing is that I have not been putting in more time than I was previously, but yet my profits have become more consistent. In other words, I was working just as hard before, but I was not working smart as I was all over the place rather than putting my emphasis on what is working! Similar to the analogy I was alluding to above, is another thing I have learned to be true and that is that knowledge is not power but specialized knowledge is. What I mean by that is lets say you want to be a trader. You can have straight A’s or know all about the newest rumors or news out there regarding the market, you could even be considered a computer wiz or know all about how a brokerage firm operates, but UNLESS YOU KNOW TRADING all that other knowledge will not be transmuted as power. Think of it like this: The lawyer that wins the most cases, (I guarantee you) is not the one that knows the most about the law. Let me elaborate, the lawyer that wins the most cases is the one that know’s best how to convince the jury and the judge to see things his way. In other words, he needs to be the best at being able to persuade people to perceive things his way. And while, the lawyer against him may know more knowledge than him in some respects of the lawy or may have had straight A’s throughout his education, all that knowledge learned will not assist him in any way, shape, or form unless it pertains to persuading the jury and the judge to see things his way. So the lesson is do not waste time on b.s. but focus on wasting time in the places where it will reward you the best. If you want to be a trader, why in the world would you be putting time into learning about marketing? Sure you may have more knowledge, but would you rather be mediocre at many things or the best at a particular craft? Idk for some people it differs, but for me I rather be the best at a particular craft. Going back to trading. I wanted to make one more point and then im done. This point is that regardless of  the reason you may think a stock or the market is going up or down, you really do not know if that is in fact the case. From what I have learned a stock (or the overall market) can do whatever the heck it wants to do and all you can do is speculate on why what happened did in fact happen. But here is where the POWER OF THE TAPE comes in. The tape is the most powerful force in trading imo, because it does not deal with the why and instead deals with the how. The tape does not give a damn why people bought AAPL at x and sold at y, but what it does react to is the manner in which they bought it at x; did they consistently buy it at x? Was there a lot of volume? All those questions are answered through the tape’s reaction toward’s the manner in which people buy and sell that stock. And that reaction is given to us (market participators) in prices. And all we can really do, is review the most recent history to determine the likely behavior that will occur in the present future. Is past history always the result of the present or future? Heck no, but trading is not a science. It is a game where the trader’s job is to simply win more than loose on a consistent basis. And remember one more thing; the tape does not care about your emotions, problems, complaints or happiness. The tape has one job and that is to print the prices that are projected to it through our (market participators) actions and react to our (market participators) actions. Treat the tape as your best friend, rather, than your enemy. Do not argue with the tape as it has no special agenda. But always remember to anticipate and not live at effect of the tape. Sure you have to see the prices it prints, but take those numbers and use them to anticipate the moves that will follow.


Thanks to all who read up to this point,



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  • Tim

    Hard to read that article without paragraph spacing.

  • Mike

    Almost didn’t read because it was a huge wall of text but glad I did, thanks for posting.

  • http://twitter.com/Dorahc22 BUY_Lo_Sell_HigH

    Def agree, great thing abt trading is you do not have to side with the “expert” it is not abt right or wrong, that is what makes the market because who knows if your theory is the reason why it went in your favor and who cares honestly. Stocks can only do two things; somebody is gonna profit somebody is gonna lose. Have a plan for both directions, execute and move on to the next.

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