Here's a screen shot from my trade station. It's a little tough to see (click chart for better view), but the red candlesticks are the ES futures, the blue bars are the NYSE TICK, and the yellow bars are ES volume. Everything is in 2-minute increments.
The NYSE TICK tells us how many stocks are trading at their offer price minus those trading at their bid, and the figure is updated several times per minute.
It is a great measure of very short-term sentiment, because it captures the degree to which the broad market reflects aggressiveness of bulls (lifting offers) vs. bears (hitting bids).
Notice above that we make a low with the NYSE TICK dipping to the -600 region (first red arrow pointing up). At subsequent lows, we get higher negative readings in the TICK (next two red arrows). What is happening is that traders are less aggressive in hitting bids during that period. Moreover, volume in the ES is drying up with the selling.
That emboldens the bulls, who begin to lift offers and create an upside breakout in the TICK on increased volume. Catching that development was good for an excellent short-term trade. This setup occurs with daily regularity, as momentum swings from bears to bulls and back again.
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3 comments:
Hi Brett,
Out of interest have you ever calculated the %age ratio of whipsaws when trading this setup?
Also in terms of stop-loss points would you take a suitable technical point indicated from the setup, or use some arbitary %age movement counter to the traded trend?
As an avid daily reader of this blog I'd like to take the opportunity to say a big thank you for your regular and excellent posting - traderfeed has become a daily must read over the previous couple of months.
regards, Ryan
Thank you very much, Ryan, for the comments and the excellent questions.
I don't use the TICK as a mechanical setup, so I wouldn't trade every single divergence or breakout. Rather, as in the blog example, I'll incorporate the TICK into a larger pattern recognition that includes price, volume, breakout levels (support/resistance), and the actual ES volume at bid/offer. My win % as a result is close to 2/3, but note that I only take 1-3 trades per day. That's because the setup also has to be in the direction of my preopening research.
In short, I'm filtering a lot of TICK signals to reduce getting whipped.
In terms of stop-loss, I set that based on the pattern. If we made a failed breakout low and now selling is drying up above that low, I'll bail out if selling accelerates, if the TICK makes a new low, and certainly if we make a new price low. This keeps the risk-reward ratio at 1:2 or better.
Thanks again for your support--
Brett
Hi Brett,
I have just discovered your blog and the NYSE tick as a trading tool, where can I have the live NYSE tick chart daily; I trade the indices' futures.
Thanks for your anticipated cooperation.
Sincerely,
Akin Tomiwa
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