Friday, May 14, 2021

Short-Term Trading With The NYSE TICK - Part One

So much of intraday trading boils down to pattern recognition.  When you view market activity day after day, year after year, you internalize patterns that recur.  Those can provide a meaningful edge in trading.

As long-term TraderFeed readers know, one of my favorite market indicators is the NYSE TICK (shown above; $TICK on most platforms).  The TICK is updated many times per minute and captures the number of stocks in the NYSE universe trading on upticks minus the number trading on downticks at every moment.  So we can think of the TICK as a moment to moment measure of trader sentiment across the market.  It tells us what traders are actually doing in the market, which is an important clue as to the psychology of the marketplace.  Trading psychology is not just about our own psychology; it's about understanding the psychology of those we're competing with.  We can pick up tells in the market just as we can at a poker table.  

If you click on the chart above (taken from my Sierra Chart screen), a one-minute chart of the NYSE TICK (above) and SPY (below), you'll see patterns noted by the arrows.  The yellow arrows show us occasions where there is increased buying pressure that is unable to move the market to new highs.  Those buyers will be trapped and will have to exit, fueling the next downleg.  The blue arrows show the market basing and selling pressure drying up, with higher TICK lows.  This led to a nice upleg.

Knowing if buyers or sellers are dominant (do we see net positive or negative TICK) and how well the buyers and sellers can move the market is very helpful information.  We want to see who is in control of price action and who is trapped.  In upcoming posts, I'll expand upon this edge.  The key is seeing enough patterns over time that you can recognize them in real time and act upon them.  It's amazing how you don't have to worry about your own psychology when you understand the psychology of the marketplace.

Further Reading: