Think About The Tick
Tick charts are just one of hundreds of different chart setups traders can use to visually demonstrate the ever changing prices in the financial markets. Despite the number of charting opportunities, far too many traders stay with what is comfortable, never grabbing full benefit of the increasing number of excellent charting systems. Tick charts are among those often overlooked.
Think About the Tick
Tick charts remain incredibly profitable for both traders and investors for their ability to smooth out the action in every day trading. Traders that utilize a tick chart are better suited in their strategies, since the tick action adds a whole new dimension to charting. Rather than just highs and lows, up bars and down bars, tick charts help define the momentum in a market and the strength of the movement.
Tick Charts for Everyone
Tick charts can fit in virtually every trading or investing strategy, but short term investors are probably the most served by their benefits. By nature, tick charts appeal to short term traders since the data is calculated based on second by second buy and sell orders. Day traders and swing traders can use tick charts throughout the whole trading process, while long term investors may prefer to use them only to find entry and exit positions, as well as find short term momentum for long term positions.
Tick Chart Methodology
Tick charts combine more information into one chart than other types. They include price, time, and volume, as well as the frequency of trades. You may notice at first sight that tick charts are far different than any other chart you’ve ever seen. Don’t be scared! tick charts are no more difficult to understand than candlestick or ohlc charts. If you understand the basics, you can make profitable use of a tick chart.
Setting Up a Tick Chart
The most common tick chart settings are the 33, 133, and 233 order settings. Since tick charts make new bars only when there are enough trades, they adjust to the rapid changes in a market and appear more or less frequently depending on the amount of volume. For example, a high volume blue chip stock or a future index will have several thousand ticks per day, while a thinly traded penny stock may have only a few. Thus, tick charts are best used on high volume stocks and equities, not on low volume securities.
Tick Chart Advantages
Of all the traders that can use tick charts to their full potential, it is momentum traders who really enjoy the greatest returns. When ticks are formed more frequently, it implies strength in a trend and a general willingness among investors to buy and sell at the current price. Similarly, low frequency means that the current trend may be weakening, and the market may seek a reversal before resuming active trading. Of course, all of the above is entirely dependent on the individual stock, index, or bond being traded.
Get Started Today!
There really is no better way to get accustomed to tick charts and their inner workings than to actually use them. Consider opening up a tick chart, rather than a candlestick or ohlc chart, to get a real feel of the market and the buying and selling waves that keep markets liquid. You just might find that after a week of using a tick chart, you’ll never use another chart again.
