Table of Contents
1 Key Takeaways
- Tick chart trading focuses on the number of trades executed for an asset, providing a more accurate representation of market activity.
- Tick charts reduce market noise by filtering out smaller price movements caused by market fluctuations or noise, allowing you to focus on significant price action.
- Tick charts help identify micro-trends, potential reversals, smart money activity, resistance levels, and average trade sizes.
2 What is Tick Chart Trading?
It focuses on the number of trades executed for a particular asset.
It provides you with a more accurate representation of market activity.
By focusing on the number of trades rather than time intervals, tick charts offer a more detailed view of price movements, allowing you to spot potential reversals and micro-trends with greater precision.
Since tick charts only display price variation when a certain number of trades have occurred, they filter out smaller price movements that may result from market fluctuations or noise.
This noise reduction allows you to focus on the most significant price action, improving their decision-making process.
3 13 Benefits of Tick Chart Trading
▍1. Reflect Market Activity
Tick charts provide a more accurate representation of market activity by focusing on the number of trades rather than time intervals.
▍2. Reduced Market Noise
Market noise refers to random price fluctuations and irrelevant data that can distract you from identifying the true market trends.
Time-based charts, such as 1-minute or 5-minute charts, can often include these noise signals, making it challenging for you to identify the underlying market conditions.
Tick charts represent certain trades or market activity rather than a fixed time period.
This allows you to focus on significant price action.
▍3. Detect Micro-Trends
These micro-trends can provide valuable insights into market sentiment and potential reversals.
They are broader market movements over a longer period of time.
This helps you identify the overall market direction and adjust your trading strategies accordingly.
▍4. Identify Smart Money Activity
Tick charts can help identify smart money activity in the market.
By analyzing the volume histogram, you can spot large trades that indicate the presence of institutional investors or informed traders.
▍5. Trend Change Detection
Tick charts excel at detecting trend changes.
You can spot potential reversals and micro-trends with greater precision, allowing them to enter or exit trades at optimal times.
▍6. Identify Resistance Levels
Resistance levels are critical areas on a tick chart where the price tends to find difficulty in breaking above.
To identify resistance levels, look for areas where the price consistently fails to move higher.
This indicates strong selling pressure.
The resistance levels can be observed as a horizontal line on the chart, connecting multiple highs or price peaks.
You can use these levels to set target prices for short positions or to take profit on long positions.
You can capitalize on potential price reversals and maximize your profits by placing orders near resistance levels.
Resistance levels can also act as a warning sign for traders.
If the price repeatedly fails to break above a certain level, it could indicate a strong resistance zone.
▍7. Recognize Average Trade Size
The average trade size refers to the average volume or number of contracts traded in each transaction.
It can be a reflection of the overall market sentiment and the level of trading interest in a particular instrument or asset.
Higher average trade sizes may indicate increased trading activity and stronger participant engagement.
For example, if the average trade size significantly increases during a downtrend, it could suggest that market participants are actively selling and driving the price down.
Furthermore, you may consider adjusting their position sizes based on the average trade size to ensure liquidity and minimize slippage.
Additionally, changes in average trade size can be used to assess the impact of market news or events on trading activity.
▍8. Trading Activity Analysis
Tick charts display each individual trade or market activity as a bar rather than a fixed time interval.
This allows you to see the volume and intensity of trading activity in real time.
Tick charts provide a more accurate representation of trading activity compared to time-based charts, which can be influenced by non-relevant periods of low trading volume.
▍9. Spot Breakouts Earlier
Tick Charts lets you get a jump on breakouts by providing real-time data.
It enables you to enter trades earlier compared to traders using time-based charts.
You can spot patterns and trends that indicate upcoming breakouts by closely monitoring Tick Charts.
If you want to stay competitive, tick charts should be an essential tool in your trading strategy.
▍10. Compatibility With Wolfe Waves
Tick charts work well with the Wolfe Waves trading strategy.
This strategy uses specific price patterns to predict potential trend reversals, and tick charts provide the detailed information needed to identify these patterns effectively.
▍11. Compress Low-Activity Periods
During lunchtime, after-hours, and overnight trading, when market activity is typically lower, tick charts condense this low activity into fewer bars.
This compression helps filter out market noise and reduces the occurrence of whipsaws, which are false price moves that can lead to trading losses.
Therefore, tick charts enable more continuous analysis between days.
You can identify and analyze patterns and trends that may span multiple trading sessions.
▍12. Simplified Trading
Tick charts simplify trading by eliminating the need to adjust time frames and intervals constantly.
You can focus on analyzing price movements and patterns without the distraction of time-based charts.
▍13. Suitable For Day Trading
In day trading, tick charts are often preferred over time-based charts.
Unlike time frames, tick charts represent the number of price changes in the market, giving you a more accurate and detailed view of price movements.
This allows you to identify trends and price action on a micro level more effectively, leading to higher probability trades.
By focusing on smaller time intervals and price variations, you can reduce market noise and better understand the underlying market trends.
4 Cons of Tick Chart Trading
▍1. Accessibility
One potential disadvantage of tick charts is their unavailability on specific trading platforms, such as TradingView.
This can limit your ability to use tick charts effectively, mainly if you rely on specific features or indicators available only on these platforms.
▍2. Data Change in Real-Time
Another limitation is the potential for real-time data changes when reloading tick charts.
Since tick charts are based on the number of trades rather than time intervals, the data can fluctuate when you refresh the chart.
This can make it challenging to maintain consistency and accuracy in your analysis.
▍3. Hard to Read
Furthermore, tick chart trading may lack readiness for professional trading.
While tick charts provide a granular view of trading activity, they may not always be suitable for complex trading strategies or comprehensive market analysis.
Professional traders often rely on other chart types, such as candlestick charts or bar charts, which offer a more holistic view of market trends and price action.
5 What Tick Chart Settings Are Best For Trading?
The tick chart setting determines the number of trades required to form a new chart bar.
You can choose from a range of tick chart settings, such as 100 ticks, 200 ticks, 500 ticks, or even 4,500 ticks.
▍Best Tick Chart For Day Trading
The 100 or 200 Tick Chart
Smaller tick settings can help capture smaller price variations and short-term trends, making them suitable for scalping or quick day trades.
The 500 Tick Chart
It is perfect for timing entries and exits.
This chart allows you to closely monitor price fluctuations and take advantage of short-term opportunities.
The 1,500 Tick Chart
The 1,500 Tick Chart helps identify the trend direction.
It provides a slightly broader view than the 500 Tick Chart, allowing you to spot trends and avoid false signals.
This intermediate timeframe is ideal for traders looking for a balance between short-term and long-term analysis.
The 4,500 Tick Chart
For a big-picture view, the 4,500 Tick Chart is invaluable.
This highest timeframe lets you analyze the overall market conditions and identify potential reversals.
▍Best Tick Chart For Forex Trading
For the most liquid Forex market, the Euro, I recommend using the 500 Tick, 1,500 Tick, and 4,500 Tick Charts.
The Euro sees high trading volume and volatility, making these Tick Charts ideal for capturing precise moments to execute trades effectively.
For less actively-traded currencies such as the Australian Dollar and Japanese Yen, I suggest using the 300 Tick, 900 Tick, and 2,700 Tick Charts.
These currencies require slightly lower Tick intervals to monitor price fluctuations and identify trading opportunities accurately.
▍Best Tick Chart For Crypto Trading
For Bitcoin, I still recommend using tick intervals of 500, 1,500, and 4,500 to capture precise price movements.
For Ethereum or other highly traded cryptocurrencies, tick intervals of 300, 900, and 2,700 can be effective.
6 How to Read Tick Charts?
▍Step 1: Learn The Basics
Price axis
The price axis shows the current price of the asset you are trading.
Volume axis
The volume axis shows the number of trades that have occurred at each price level.
Tick candles
The tick candles are the vertical bars on the chart. Each candle represents a certain number of trades.
The color of the candle indicates whether the price went up or down during that period.
The “open,” “close,” “high,” and “low” signals
These signals represent the price levels at which each tick occurred within a specified interval of time.
The open indicates when the trade was initiated, giving you insight into the starting point of a price move.
The close tells you when the trade was completed, providing information about the final price level.
The high represents the highest value reached during a given trade, while the low shows the lowest value.
▍Step 2: Identify The Basic Patterns
Upward trends
Upward trends are characterized by a series of candles with higher and lower highs.
Downward trends
Downward trends are characterized by a series of candles with lower and lower highs.
Support and resistance levels
These are areas where the price has historically bounced off. You can use these levels to place your trades.
Breakouts
Breakouts occur when the price breaks through a support or resistance level. Breakouts can be a good signal to enter a trade.
▍Practical Example
Let’s say you are looking at the Bitcoin 500-tick chart and notice that the price has broken out of a resistance level.
You also notice that the trend is up.
This could be a good signal to enter a long trade.
You could place a buy order above the resistance level and set a stop loss below the previous swing low.
You could also use a technical indicator such as the MACD to confirm the trend and set your take profit level.
It is important to note that this is just an example trade.
There is no guarantee that any trade will be successful.
7 Using Tick Charts with Technical Indicators
Tick charts provide a more accurate representation of market activity and can help identify micro-trends that may be missed on conventional time-based charts.
You often incorporate indicators such as volume, momentum, and overbought/oversold levels to enhance tick chart analysis.
Volume can indicate the strength of price moves, while momentum helps identify potential reversals.
Overbought/oversold levels can warn of market exhaustion or extreme price variation.
Moreover, you can monitor the Relative Strength Index (RSI) to identify overbought or oversold levels.
When the RSI reaches these extreme levels, it can indicate a potential reversal in price direction.
If the RSI starts trending back toward the middle range, it indicates a resumption of the prevailing price trend.
This continuation signal is further supported by increased trading volume observed on the tick chart.
8 Tick Charts vs. Other Types of Charts
Tick charts focus on price movements and display a new bar for every specified number of transactions, known as ticks.
These charts allow you to see the ebb and flow of trading activity in real-time.
By focusing on transaction-based data, tick charts capture market movements regardless of the time it takes for those transactions to occur.
Each tick represents a specific number of trades.
▍Tick Chart vs. Time Chart
Time charts are formed based on a set time frame, such as 1 minute or 1 hour.
These charts are widely used because they establish a uniform x-axis on the price chart and generate price bars based on specific time periods.
In time-based charts, the x-axis represents time intervals, while the y-axis represents price.
As time progresses, new price bars are formed, visualizing the price action during the designated time period.
This allows you to identify trends, support and resistance levels, and potential reversals.
Commonly used time frames include 1-minute, 5-minute, 15-minute, 1-hour, and 4-hour charts.
Time charts are useful for analyzing longer-term trends and identifying key support and resistance levels.
However, Time charts can be influenced by market noise and variations in trading volume.
Tick charts reflect changes in market conditions and trading activity more accurately, as they are based on actual trading activity.
Moreover, tick charts can provide a more granular view of price action, allowing them to see smaller price variations and micro-trends that may not be as evident on conventional time-based charts.
▍Tick Chart vs. Volume Chart
Volume charts prioritize the number of contracts or shares traded, providing a clear picture of trading activity based on the volume of shares or contracts exchanged during a specific time interval.
Volume charts allow you to identify patterns and trends based on the total order size.
To get a comprehensive view of market activity, it is advantageous to use both tick and volume charts together.
Tick charts help identify quick shifts in trading sentiment and micro-trends, while volume charts provide a broader understanding of market conditions, activity levels, and participants’ participation.
▍Tick Chart vs. Range (Renko) Chart
Range charts are based solely on price direction.
Instead of using time intervals or tick bars, range charts print a new bar for a predetermined price movement.
This means that each bar on a range chart represents a specific amount of price change, regardless of the number of trades that occurred during that time.
On the other hand, tick charts focus solely on the number of trades that occur in the market.
Range charts have the benefit of simplifying the noise in the market.
By considering only price movement, range charts help you identify clear trends and potential reversals.
However, range charts may miss out on important price information and can be slower to react to market conditions.
Tick charts, while accurate, can get cluttered in high-volume market activity.
9 Final Thought
In conclusion, tick charts can be valuable for scalpers, swing traders, and day traders.
The main advantage of using tick charts is that they can filter out market noise and provide a clearer picture of price movements.
This can be particularly useful for scalpers who rely on quick, short-term trades and need to make fast decisions based on precise price action.
For swing traders, tick charts offer the advantage of capturing micro-trends within more significant market trends.
By analyzing tick charts alongside longer time frames, swing traders can identify optimal entry and exit points, increasing the probability of successful trades.
Tick charts may provide a more granular view of the market for day traders, allowing you to identify quick intraday shifts in trading sentiment.
However, it is important to remember that tick charts are not without their drawbacks.
The main disadvantage is that tick charts may not be suitable in slow or range-bound markets, as they may not provide enough trading activity to base decisions on.
It is also important to analyze multiple time frames to comprehensively view market conditions and trends.
To effectively use tick charts, traders should consider analyzing multiple time frames to confirm price movements and trends.
This can be done by comparing tick charts with larger intervals, such as a 1-minute or 60-minute chart, to identify key support and resistance levels.
By understanding the pros and cons of tick charts and incorporating these professional tips for crypto trading, you can harness their power to make informed trading decisions and maximize profits.
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