The slang term “fighting the tape” refers to making an investment move that runs contrary to current market trends. While savvy investment can involve making projections that appear to conflict with the current market, this activity involves blatantly ignoring signs and signals. In addition to causing problems for individual investors, fighting the tape can also have an impact on the market as a whole. By engaging in confusing trading activity, people may stimulate further movement, which can make a trend worse.
In this case, the “tape” is the ticker tape historically used to report stock prices. A number of slang terms reference the ticker in one form or another, emphasizing its central role in trading activities. Investors rely on recently updated information about upward and downward prices to make decisions about how to move on the market. They may buy and sell on the basis of “ticks,” single movements up or down. While a literal tape has been abandoned in favor of digital displays, the original meaning lives on.
One example of fighting the tape can occur in a down market, when investors continue trading a security even though the price is falling. Their continued trading activity can depress the market even further, which may compound losses. People can also bet on downward trends when stocks and other securities are obviously rising. Their movements may run contrary to their own interests as they might do something like selling while the price is still rising, thus taking a loss.
Working against trend is not always a bad strategy. Some investors rely on a sense of useful countertrends to make decisions about how and when to make moves. They may rely on betting against current trends to position themselves for market movements. This requires careful analysis and forecasting to identify signs that might guide investments. What looks like fighting the tape from the outside in these cases might actually be a sound investment move based on logical decision making.
A related term, painting the tape, involves engaging in misleading investment activity to make other investors think a security is attracting interest. This is a form of securities fraud, as it is conducted with the specific intent of tricking people into buying or selling because they think they spot a market trend. There can be blur between painting and fighting the tape, if investors aren’t careful about how they time their decisions, or undertake trades with a specific agenda to fool other investors in mind.