Using Tick Charts to Stalk your Market at Periscope Depth

It’s the Baltic sea at the height of the cold war. Naval activity has increased and tensions are running at an all-time high. From within your nuclear submarine, the bogie count is mounting and it’s time to go on the offensive.

Before making your deep dive and following attack run, you head to periscope depth to radio your intentions and get a different perspective.

Changing your chart view to show ticks can provide a different angle on market volume that positions you to confirm your attacks and size up the competition.

Knowing when and how to take this view in can be the difference between notching trades that kill, or putting your account down at the bottom of the ocean.

A view of the market that you can’t afford to ignore

The concept of the periscope was first explored by Johannes Gutenberg (that’s right — the printing press guy) and was later incorporated for naval military use by Hippolyte Marie-Davy in 1854.

The advantage was simple — it allowed commanders to view surface targets (or threats) without having to reveal their position or face immediate danger. Over the course of World War Two, this view meant the difference between life or death while allowing subs to zero in on their prey.

In any given market, you can take a quick periscope view in the form of tick charts to evaluate your position to plot an attack — or avoid dangerous conditions altogether.

Tick charts provide an alternative view of the market by tracking the number of trades at a particular price level — vs. plotting activity over time. Each candle can be set to track a particular number of trades. For example, if you have your tick chart set to show frames of 100 trades, one candlestick will display a value of 100 trades.

If the same 100 trades took place over a 15-minute period using a standard time chart you’d have 3 candlesticks vs. the single candlestick with your tick chart.

You can change this to get a broader, or more granular, view of your respective market — depending on your objective. Supplementing your standard time charts with this view can provide the advantage you need to guide your trade locations.

Early trend detection that helps you target entries that kill

During combat, submarines often found it easier to accurately aim their torpedos using visual confirmation gained from a view of the surface. Bringing the sub just below the surface and extending the periscope to verify the range brought a big advantage.

You can use a tick chart to quickly evaluate a trend and a potentially impending correction. With a pronounced trend, you’ll find increased movement in the trend over multiple periods while the correction will have a limited number of candles by comparison.

Get in on trends before everyone else knows what hit them.

Using the ES example to the right, you can see how a trend can be better verified by looking at the volume of trades taking place at the start of the move up. While our standard time-based chart simply shows a candle shooting up, the tick chart would have been going with crazy at a clip of 500 trades a candle — all moving up.

Surely an indication that price is about to move up — and NOT something you would have seen looking at your standard time-based chart.

Insight into where the big ships are hunting

The kill ratio for submarines was so high that shipping lanes were changed, and the very outcome of World War Two hung in the balance. The advantage held by sub commanders who could sneak up on their targets, grab a peek through the periscope and take a high probability shot was deadly.

Spot the big moves that drive price - and profit from them.

Simply adding a tick chart to your array of views can give you an enormous advantage over many traders watching candles jumping around on their time-based charts.

In addition to being able to spot trends and corrections you gain an invaluable glimpse into what the big guys are doing. With our ES example, the tick chart setting was at 500. Increasing the setting to 1,000 not only shows the same trade volume, but also gives us confidence that the institutional traders are looking to move price up.

This allows you to locate your trade at the start of the trend and make an entry that moves with the traders that are driving 90% of the volume.

Verifying your locations and entries with this type of confidence will increase your profits and consistency.

Deadly when used as a supplemental view

Make no mistake, time is a critical component in evaluating trade locations and price movement. Especially in a sideways, grinding market.

As volume gathers, pushing price out of the consolidation zone, you’ll be able to spot this and trade with the momentum by keeping an eye on your tick chart. Many traders have successfully added this view as an adjacent view or window alongside their time-based chart.

Monitoring the two together can provide valuable insight into the forces driving any particular pricing pattern. If you’re trading in NinjaTrader 7 or 8, simply create an additional tab, or add the chart directly below your time-based chart. Type a number with a ‘t’ following it to change your tick view in an instant.

Go to periscope depth and spot winning trades

The great submarine commanders knew how to take their subs to periscope without their enemies realizing they’d surfaced right under their nose. During the Second World War, they even squeezed off a torpedo or two before anyone knew what happened.

Switch your chart view to show the number of contracts taking place at different price ranges. You’ll find the view to be significantly different from your typical volume chart — giving you an advantage when locating your trade.

Spot swings as they unfold by seeing the preceding tick volume at a price level back off as buyers or sellers back off. Compress your view of low activity periods, like aftermarket hours, for faster analysis. And finally see when the pros are starting to step in so that you can trade with them.

Go on the attack and profit while everyone else wonders what hit them.

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