About Tick Charts
What are tick chartsCharts used for day trading can be based on several different criteria, some of them being time, ticks, price range or volume. Tick based charts represent price change during given number of transactions on the market. E.g. while time-based charts draw a new bar after a set period of time, tick charts display a certain number of trades (ticks) before printing a new bar.
A chart drawing a bar after every 30 transaction is often referred to as a 30-tick chart.
BenefitsUsing tick charts exclusively or in combination with the classic intraday time-based view could enrich your chart analysis and provide you with some additional information.
One of these additional information is the correlation between market volume and price development. As tick charts are transaction based and make new bars only when there have been enough trades, they adjust to the market and draw more bars in case of high activity. This helps to notice momentum and increasing volatility. The same way during low activity periods (like noon or after-hours) tick charts only display a few bars as opposed to time based charts where you'll usually see a row of smaller less important candles. Without this accumulation of small candles tick charts make it easier to spot trends and properly identify real support and resistance levels.
While during high volatility periods time based charts may show only a long candle, tick charts show that candle divided into some smaller candles and may provide more information about momentum and direction, or a possible reversal. This might be especially helpful for traders scalping.
Patterns also tend to be more symmetrical on tick charts.
DisadvantagesUnfortunately only some brokers/charting packages provide tick charts. As an addition looking at tick charts from different data feeds you will notice that none of them are the same. The reason is that tick charts are based on the number of completed transactions, however this number can change because of some factors like:
What tick chart time frame to chooseThe time frames to choose from are limitless. Some prefer charts with 33, 133 or 233 ticks, others choose from fibonacci numbers like 13, 21, 34, 55, 89, 144, 233, etc.
Another approach is selecting the tick number by comparing it to a time-based chart. E.g. if someone trades 5 minute charts, he may choose a tick chart looking similar to that chart in an average market activity period. Then he would be able to see when the market volume changes during high or slow activity periods and trade accordingly.
There is no best time timeframe to recommend. There are different people with different strategies and after some experimentation and evaluation everyone will be able to pick a tick chart time frame that suits them best.
How to trade using tick chartsJust as with any other chart types there are many trading strategies using tick charts. One could prefer 2000-tick charts for day trading while another would use 70-tick charts for price action scalping. You need to look around on the internet, experiment and find (or develop your own) one that suits you the best.
If you are interested in trading Forex and scalping, you might also want to check out the book Forex Price Action Scalping by Bob Volman. Bob is an independent, professional trader who uses 70-tick charts to trade the EURUSD currency pair at Forex and in his book he leads you into the world of professional scalping based on price action.