Understand time and sales (tape reading) — Stock-Market notes

WHY does the tape exist / why do we read it?

WHY it matters: The order book (Level 2) shows intentions (resting limit orders that can be cancelled). The tape shows facts — trades that already happened and cannot be undone. Intentions lie; executions don't.

WHAT is Time and Sales?

Figure — Understand time and sales (tape reading)

HOW to read a print (colour logic derived from first principles)

$\text{trade price} \ge \text{ask} \;\Rightarrow\; \text{buyer was aggressor} \;\Rightarrow\; \color{green}{\text{green print}}$ $\text{trade price} \le \text{bid} \;\Rightarrow\; \text{seller was aggressor} \;\Rightarrow\; \color{red}{\text{red print}}$ $\text{bid} < \text{trade price} < \text{ask} \;\Rightarrow\; \text{"mid" print, ambiguous (grey)}$

This isn't a fact to memorise — it follows from the definition of who crosses the spread.

Formula Delta (cumulative aggressor imbalance)

The tape lets you build delta, a running measure of net aggression. Deriving it:

Let each print $i$ have signed volume $v_i$ where $v_i = \begin{cases} +\text{size}_i & \text{if green (buy-aggressor)} \\ -\text{size}_i & \text{if red (sell-aggressor)} \end{cases}$
Cumulative delta over a window is just the sum of signed prints: $\Delta = \sum_{i=1}^{N} v_i$ WHY sum? Each aggressive buy is +demand pressure, each aggressive sell is −pressure; the net running total reveals which side is paying up to get filled. A rising price with falling delta is a warning: price up but sellers are aggressing → likely fake.

Worked Examples

Common Mistakes (Steel-manned)

Active Recall

Recall Test yourself (hide the answers)

What three fields must every tape print contain? → Time, Price, Size (+ venue, aggressor colour).
Why is a green print green? → Trade executed at/above the ask → buyer crossed the spread.
Define absorption in one line. → Aggression floods one side but price won't move because a large passive order soaks it up.
Formula for cumulative delta? → $\Delta=\sum v_i$ , with $v_i=+$ size (green) or $-$ size (red).
Why can the tape be more truthful than Level 2? → Tape = executed facts; Level 2 = cancellable intentions.

Recall Feynman: explain to a 12-year-old

Imagine a busy candy shop. There's a sign: sellers want ₹105, buyers offer ₹100. The tape is a notebook where the shopkeeper writes down every candy actually sold and at what price. If lots of kids keep paying the seller's ₹105 price and the price starts creeping up — buyers are hungry (green). But if kids keep paying ₹105 and the price still won't rise, it means there's a HUGE secret box of candy at ₹105 that never runs out — one big seller is quietly dumping. When that box empties, prices can suddenly crash. The tape lets you see the box before it empties.

Connections

Order Book & Level 2 Depth — intentions vs. the tape's facts.
Cumulative Delta & Footprint Charts — visualising $\Delta=\sum v_i$ .
Bid-Ask Spread — the spread you must cross to be an aggressor.
Absorption & Iceberg Orders — hidden passive size on the tape.
Volume Profile — where the aggression accumulated over price.
VWAP & TWAP Execution Algos — why big orders arrive sliced, not as one print.

What is Time and Sales?

A real-time chronological list of every executed trade, showing time, price, size, venue, and aggressor colour.

Why is a print coloured green?

It executed at or above the ask, meaning a buyer crossed the spread to trade immediately (buy-aggressor).

Why is a print coloured red?

It executed at or below the bid, meaning a seller crossed the spread (sell-aggressor).

What is a mid/grey print?

A trade executed between bid and ask with no clear aggressor; excluded from naive delta.

Define absorption.

Heavy aggressive orders keep hitting one side but price won't move, because a large passive limit order soaks them up.

Formula for cumulative delta?

Δ = Σ vᵢ, where vᵢ = +size for green prints and −size for red prints.

Why is the tape more truthful than Level 2?

The tape shows executed trades (facts that can't be undone); Level 2 shows resting limit orders (cancellable intentions).

Steel-man: why is 'big print = institution' wrong?

Institutions hide by slicing into many small algo child orders; one large print is often a sweep or clumsy block, not stealth.

Warning sign: price rising but delta falling means?

Sellers are aggressing while price climbs — a likely fake move / weak rally.

Who is the 'aggressor' in a trade?

The trader who crosses the spread to get filled immediately, paying the ask (buy) or hitting the bid (sell).

Concept Map

Hinglish (regional understanding)

Intuition Hinglish mein samjho

Dekho, Time and Sales — jise "the tape" bolte hain — ek live list hoti hai jisme har ek actual trade likha jaata hai: time, price, aur size ke saath. Chart tumhe sirf summary deta hai (ek candle mein 800 trades daba diye jaate hain), lekin tape tumhe raw sach dikhata hai — kaun aggressive tha, kitni badi quantity thi, aur abhi is second mein buyers jeet rahe hain ya sellers.

Colour ka logic simple hai, ratne ki zaroorat nahi. Jo bhi trade turant karna chahta hai use spread cross karna padta hai. Agar tum abhi buy karoge to seller ki price (ask) pe pay karoge — isliye trade ask pe ya usse upar hua to matlab buyer aggressive tha → green print. Agar bid pe ya niche hua to seller aggressive → red print. Bich mein hua to "grey", clear nahi.

Sabse important cheez hai absorption. Maan lo buyers baar-baar ask pe khareed rahe hain, 12,000 shares aggressive buying, lekin price hilti hi nahi. Iska matlab ek bada aadmi wahan chupke se apna huge sell order refill kar raha hai aur saara buying soak kar raha hai. Jab buyers thak jaate hain, price achanak neeche gir sakti hai. Yahi trap retail ko fasata hai — "green matlab upar" wali soch galat sabit hoti hai.

Practically, cumulative delta ( $\Delta = \sum v_i$ ) track karo: green ka +size, red ka −size, sab jodte jao. Delta ka rasta batata hai net pressure kis taraf hai. Par yaad rakho — delta ko hamesha price response ke saath padho. Delta positive par price stall = buyers trapped. Yeh order-flow ka asli edge hai.

Test yourself — Order Flow & Tape Reading

Connections