May 172010
 

The data in time & sales is the only data we have that is generated by the market in real time. The time & sales shows:

  • time
  • price
  • volume
  • bid
  • ask

In my opinion the time data is often ignored yet highly useful. Moves start and end with a flurry of trade activity. If you watch the time & sales when trading then you’ll see this, often called “flooding”. At the beginning of a move if you’re long you want to see a flood of buying. Ideally you want to be in before the flood to avoid slippage and getting in at a higher price, but at the same time this flood can give you confirmation for your trade.

At the end of the move, all the “laggards” will be joining in, thinking that the move will continue forever. Using the long as an example, the late-comers will be buying in. And the high price will attract sellers. The result is another increase in the trade intensity. Only this time it’s a sign of exhaustion.

Exhaustion doesn’t always mean the move is over. The market can simple pause and take a breather, or even pullback a little. It can then either continue the original direction (up in our example) or go into a correction. This tool alone cannot tell you which is going to happen so it’s important that you use it with other tools.

I also find that there will be an increase in the trade intensity when stops are taken out. This often happens immediately before a reversal.

So how do I use this tool? I use it to alert me to potential buying & selling exhaustion. I do not use it as a signal to enter trades. My trading is based on discretion. I look for a confluence amongst all my data, and the pace of tape is just one piece of the puzzle. I typically don’t even look at the chart. Instead I rely on the audio alerts.

The following video and chart explains some of these concepts. For the indicator to be responsible, a very fast tick (or volume) chart must be used. It’s important to point out that I do not trade off this chart, I’m only showing it here with my chart markers to illustrate how the indicator can be one element in a decision making process. Please make sure you understand that I am not looking at this chart while trading. This has been a source of confusion before and I want that to be perfectly clear. Since I trade using multiple charts, the reasons for my trades cannot be seen on this chart alone.

The image below shows the signals & trades that I discuss in the video.

Click the image to see it full size

SETTINGS

This indicator only works on a fast tick chart (does not work on minute or any other chart time).  I  I suggest putting it on its own chart and not on your main trading chart that way you can trade whatever timeframe you want.

There are 3 settings you need:

  1. The tick bar size.  This is basically the increment size for the reading.  If you use 100 tick it’ll increment by 100.  So a 1 tick would be most accurate but I prefer 100 so that I can read the price action on the chart.
  2. The period is the number of seconds in which to look for the trades.  If you put 5 seconds it’ll display the number of trades in the last 5 seconds.
  3. The threshold is the required number of trades in the last period in order to give a signal (turn orange and display the paintbar).  There is no single best parameter as it depends on the market and the activity.  I just eyeball it so that it gives me a few signals but not too many and then update it every week if needed.

Available for NinjaTrader 6.5 & 7.0: PaceOfTape NT65 v1.0.4 & wav file for alert (unzip and place the wav file in C:\Program Files\NinjaTrader 6.5\sounds)

Available for Multicharts (Thanks to Richard):PaceOfTape MC Source

I hope to make it available for other platforms in the future. If you’re a developer and would like to help make it available for your platform please let me know.

  80 Responses to “Pace of Tape Indicator”

  1. I love this filter,and wanted to find u and say thanks for sharing,

  2. do you have a version of your ‘pace of tape indicator’ to work for the newest version of ninja trader 7 – ??? If so where might I find it??

  3. Frank – does the version I posted not work for NT? worst case you can extract the .cs file and copy it to your NT7 indicator directory. i use this on NT7 but I am not sure I have packaged it up with NT7.

  4. Hi Michael

    I would like to develop the indicator for CQG. If you could please e-mail me we can try and do this?

    Regards,
    Pieter

  5. H Michael:

    Maybe I missed it, but where is the NT7 zip file for your Pace of Tape indicator??? I saw the link for the 6.5 but not for 7. Also, i noticed that a lot of comments are dated. Have you recently experimented on different markets and what setting you might find the most appropriate?

    Thanks for your generosity. Unfortunately, in this field of endeavor, there’s a new Guru every week with a pay webinar service that show daily incomes of over 300 ticks. If that were I, i’d sincerely do what you do, and that is to help serve my fellow trader, since, if I’m making this kind of change, it’s always better to give than receive.

    Thanks,

    Jeff

  6. Hi again Michael:

    Well, I overlooked it and was able to import the zip and wave file. I was still curious if you had experienced over time settings that you thought might be optimal for various markets???

    Also, I came across a website that sells software called “Order Flow Analytics” by Preveda Systems, which as the title suggests, is an order flow analysis software. Have you heard of it? If you have, do you think that this type of analysis could be programmed and implemented on the NT7 platform? I would be interested in paying for such a program. Primarily because I want to stay with one main platform, NT7, and not be looking at too many different programs that I get analysis paralysis…

    Any response would be greatly appreciated.

    Sincerely,

    Jeff

  7. Michael,

    I want to integrate your PaceOfTape indicator into a strategy. If the pace of tape breaks a defined threshold would be one of the conditions I would use to determine an entry.

    Is this possible with how you have written the indicator?

    Gil

  8. Gil – this is definitely possible as I’ve provided the source code. I do not remember if I exposed the POT level but if I didn’t this is really easy to do just make a property for it.

    I don’t recommend using it in this way, especially mechanically, but you’re welcome to try it out and see what you get.

  9. Michael – Have you tried setting a threshold for the size of the trade when determining the pace of tape? In other words do you think the size of the trade makes a difference in determining if the pace is being driven by institutions (significant) or if it is retail trader driven (less significant).

  10. I have not. in the past I have found no use for filtering based on trade size in any indicator. the reason is the trade size that prints is more a result of the resting orders than it is the person placing the trade.

  11. So are you saying that you do not look for large block trades to confirm your entries? Granted it is not always that clear cut but for me when I am looking at the tape it is important for me to see block trade to validate the direction.

  12. Gil – I do not watch time & sales. I watch the footprint. It doesn’t matter to me whether volume comes in one large track or many small trades (that is decided by the resting orders NOT by the size of the traders hitting the bid/offer).

  13. Michael, Like the indicator, have not been able to get elert sounds……am using it on Ninja. Any thoughts?

  14. Dameron – you have to copy the alert sounds from the zip file into the sounds directory of your ninjatrader install (in program files).

  15. Thanks M, do you have a suggestion for start up settings for the Russell with your indicator? Thanks again

  16. Dameron – I’m sorry but I don’t have data for Russell so I can’t help you there. Just experiement around as it’s trial and error and can even change depending on the activity of the moment.

  17. Sorry, I do not mean to sound naive, however I am having trouble installing the Pace of Tape
    on NT7. When I go to import the script it does not recognize it. Help!
    thanks!

  18. Hi Michael,

    I just downloaded and tried your indicator on NT7. When I tried it on a 233 tick chart, I get constant bars of value 233, with occasional spikes. When I put it on a 4000 volume chart, I get constant bars of value 4000, with occasional spikes. I’m applying it on ES.
    I saw that Tom (February 13, 2011) posted on the same issue and you suggested changing calculate on bar close to true. I did that but its still the same. Any ideas how this can be solved? Thanks!

  19. I have the same problem as John (constant bars of the same value) on NT 7, is there a fix for this?

  20. Michael,
    Please advise if this works for NT7.

  21. Will this indicator able to handle the data incoming by a datafeed in September 2015 when there will be the new CME MDP 3.0 that will substitute the old FIX/FAST protocol?

  22. Do ya have the code for ThinkOrSwim ?
    I Love your work & video. I am a seasoned trader from Memphis for near 5 years.

  23. HI. Do you have this code for tradestation? Thanks

  24. Hi Michael,
    I’ll be appreciate to you so much if you send me a code of the Pace of Tape indicator for Multicharts.net.To my regret I don’t have programing skills and can’t transform the code for Multicharts which you represent to Multicharts.net. I’m scalping ES now and it will be very useful for me. Thank you in advance

  25. Serge,

    I don’t have multi-charts so I can’t help you there. Someone else had written it for multicharts which I linked to above (http://www.tradewiththeflow.com/wp-content/uploads/2010/05/PaceOfTape-MC-Source.txt).

  26. Is there a version for NT8? Thanks.

  27. Thanks. pace of tape is grate. can you put one up for ninja 8 ?

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