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Trading with X tick charts: the hidden secret of successful traders

What advantages do I get by using the (x) ticks charts?.

1. Tick Charts allow you to follow the Professionals. Large Average Trade Size = Professional Activity. The Emini is a perfect trading vehicle because we know the number of contracts in each individual trade. Regardless of how advanced technology is used to measure tick data, the most popular indicators for day trading would never work the same way on tick charts as these work on a bar or candlestick based chart that shows the OHLC price data on standard time frames like 5-minute or minute charts.

The Importance of an Adaptive Day Trading System

Regardless of how advanced technology is used to measure tick data, the most popular indicators for day trading would never work the same way on tick charts as these work on a bar or candlestick based chart that shows the OHLC price data on standard time frames like 5-minute or minute charts.

However, whenever the market became volatile, they would print or more bars in a few seconds, leaving me completely on the sidelines. There was no way to say when a new bar would print so I had to watch the charts rigorously, and would still get surprised when a new bar finally was printed. Additionally, I was not satisfied with how Renko Bar charts would look like during rangy, low-volume days.

They would fake me out a lot, or not grant me any entries, and I had to switch the number of ticks represented by Renko bars to get tradeable charts, which eventually I did by resorting to ATR values, but this was just not what I wanted. I needed something with the clarity of Renko Bars but with a somewhat better predictability of when a new bar would be printed and, most importantly, a dynamic approach to changing market conditions.

These were a real eye-opener for me. However, in Futures, there are centralized exchanges, and globally, every trade that comes into a certain market, is registered at the respective exchange with a certain volume and this information is accessible by everyone.

And if you still want to trade Forex, simply go for the Currency futures on the CME which resemble what is happening on the Forex market but with complete volume data available and they are quite liquid now, plus tick charts work great, so go for it if you want to. So what tick charts do is that they count a certain number of trades which you have previously defined, and then print a new bar every time this number of trades is reached.

For example, I use ticks charts for timing my entries; that means whenever trades came into the exchange, in whatever range price moved during that period, will then be shown as a candlestick bar. Time does not play a role here.

In times of high trading activity, a new bar will be printed roughly every minute on the ticks charts on the E-Mini Dow Jones, for example, and in off-times, it can take several hours for a new bar to be printed. Mind you, tick charts are not to be confused with volume bars!

Volume does not play a role for the creation of tick charts, as a trade is simply a trade, whether it comes with the size of 1 contract, or contracts.

Interestingly enough, as I observed, during certain times of the day every tick bar will close at around the same volume, but that is another story. So other than different criteria for when a bar opens and closes, the charts look the same as time-based charts.

Now, the both in comparison. On the left, a ticks chart, and on the right, a 5 minutes timeframe chart. The two pink bars mark the same area on each chart. As you can see, while the tick chart printed a lot of bars during the volatile up-and down moves with plenty of entry opportunities, the 5m timeframe would have left you standing in the rain very likely, as V-tops and bottoms are almost untradeable on this very popular timeframe for daytraders.

But how would it look on the M1 charts? Now these charts look much more familiar, and the M1 becomes much more tradeable during these high volatility moves. So why not just trade an M1 chart? Well, because of this:. As you can see, the tick chart printed only 9 bars in roughly 7 hours during times of low volatility, delivering us an incredibly clean chart, while the M1 chart printed a lot of horrible stuff that would have lead us to trades where there are no trades.

This can, of course, be partly solved by not trading during off-hours. However, this problem also exists during trading sessions with little trading activity, and these do happen again and again and again and are what actually cost traders a lot of money. Everyone can make money in a trending market, but how about when prices start to range, produce fakeout after fakeout, and behave not as we want them to?

This is when tick charts are king, as they put much less emphasis on consolidations and times of low trading activity. They are, simply put, much easier to read and to trade. On the contrary, unpopular penny stocks may not have a single transaction during lunch hours, and you may have to wait a long time for a single tick bar to appear! Also, there is no standard time frame to watch the tick data.

A lot of brokers show tick data on the 1-minute chart. But, as you do not know which stock would have how many ticks during a single time frame, it is really not possible to compare the tick charts like bars with fixed time frames. You may say that tick charts based on the number of ticks is a good way to go about it.

In fact, you would find that a lot of day traders often watch tick charts based on Fibonacci numbers. But, how would you decide on which tick charts to watch? There are simply too many possibilities as you can use any number of tick count to formulate your tick chart. As we just discussed that there are hardly any standardized time frame to watch the tick charts and the ticks can come 10, per second or absolutely zero — there are no hard and fast rules in the tick universe.

So, during important news releases or market opening, the tick charts can move really, really fast. There are enthusiastic people in this world who have invested millions in high frequency trading and mainframe computers to interpret the tick data. But, as a human being, you would often find the speed of the tick charts to be overwhelmingly fast to make any sense of it.

On the other hand, if you are trading unpopular stocks, you may have to wait a long time to find a complete bar on the tick charts that contains the number of ticks you have selected, which would not help you to make any trading decisions during slow moving market times.

Many beginner traders think that keeping an eye on the tick charts can give them an edge in day trading. If you cannot interpret the real-time data, because at times, it is too fast, what good would it do for improving your trading results? We are not saying that tick data is worthless, just that for day traders who make trading decisions based on technical analysis, it can often do more harm than good.

Instead of religiously watching tick charts, simply watching the volume indicator can give you the real-time information you need. Moreover, since volume can go up or down relative to the time frame you are watching, you can actually use it to make an informed trading decision. If your broker offers free tick data, you are in luck. But, before you schedule an hour to watch it tonight, let us be the bearer of bad news.

Nothing in this world is free and the free lunches you get in life often cost you more some other way. The free tick data provided by many brokers often contains errors, if not missing parts that can prove costly if you use it to formulate your trading strategy.

On the other hand, quality tick data can be really expensive. Trust us, you would be much better off buying that Tesla Model S you always wanted with that money. You would also find it interesting that unless you are looking at a fixed time frame, the OHLC data would not make any sense at all. For example, the opening price of a 1 minute chart and 5 minute chart would be different, right?

What if there were not open or closing price of the bar for the last 2 bars? How do you think your moving average indicator would behave in a situation like that? Regardless of how advanced technology is used to measure tick data, the most popular indicators for day trading would never work the same way on tick charts as these work on a bar or candlestick based chart that shows the OHLC price data on standard time frames like 5-minute or minute charts.

Moreover, it will not make much sense if other traders were not seeing that same breakout, as the whole concept of momentum trading depends on being in sync with the market.

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Since the number of transactions per candlestick is constant, each volume bar reflects the average volume of all transactions of the corresponding candlestick.

Closed On:

These two facts will make trading much, much easier for you, trust me.

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