ok.. Tape Reading is also known as just reading price action, too
Googling all this, i came across orderbookfx - subscription service. What they have looks basically like the TradeStation Matrix. Time and Sales is the Market Depth. I am uniformed on both of these approaches to trading - i'm all Technical Analysis
So Order Flow is just that - submitted orders. They do not necessarily have to be filled orders, which would put them into Time&Sales, i think..
still learning, thanks
Tape reading in terms of reading Time & Sales is quite different from reading price action from a chart.
Time & Sales is not market Depth.
Market Depth/L2/DOM is an order book. These are limit orders on the buy and sell side at various price levels that MIGHT represent actual intention to trade but also MIGHT be fake.
Time & Sales is a list of trades executed. Someone submits a buy market order and that is filled against a limit sell order. A market sell order is filled against a limit buy order.
So - Market Depth/L2/DOM can be thought of as 'intent' to trade but it might be fake.
Time & Sales is 'actual' trades.
Using the two, you see the intent & actual. Actual trading is always a bit different to the intent. Orders get pulled, orders get added but rarely is it a case of intent=actual.
One of the methods of using order flow data is in using the actual trade data alongside the DOM/L2. Some people ignore that alltogether though and just use the tape.
In terms of how to combine this with price action - price action from a chart will give you a rough idea of where a trade might be worth taking. This is also referred to as 'context'. Tape reading shows you if the market is reacting at that level. An example of that might be that you expect a reversal up, you see a lot of sell orders on the tape but you no longer see price moving down. In this case, it is often because a player is absorbing that selling by buying what is sold. If you see this, then it acts as a confirming factor for your PA/TA based set up.
This is a good path you are on but you need to sit down with a Time & Sales and a DOM and watch it for a while. A good way to do this is with a free copy of Ninja and a free Zenfire data feed looking at a futures market.
