In a market dominated by High Frequency Trading (HFT) and hedge funds, it is becoming increasingly difficult for the individual trader to gain an edge. HFTs and hedge funds do their best to hide their activity (random lot sizes etc) but the one thing they can’t hide is their desire to execute a large number of trades at a given price. One can glean a hint of this activity by watching the time and sales tape. However, tape reading is a skill few possess. The Tape Momentum indicator allows visualization of rapid changes in the pace of the tape. As large traders try to execute numerous trades at a given price, the tape speeds up and the Tape Momentum indicator spikes to indicate this activity. The average tape momentum bars are colored red. As the momentum increases, the bars turn yellow and then green when an extreme spike occurs. Spikes are cues that large players are rotating in/out of the instrument (i.e. potential reversals or breakout/breakdown). This is designed to be used as an exit cue – a signal to tighten your stops if in a trade.

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