What Is a Tick Chart

What Is a Tick Chart in Day Trading?

What is a tick chart in trading? These types of charts are popular amongst future traders. But when it comes to chart styles, is there one that’s better? Trading is an activity of buying and selling both goods and services. Trading is not easy, and most people use ‘trading assists’ to help them make the right trading decisions and for trading wisely. If you are looking for a trading assistant who can help, a tick chart is the one to go for.

Tick charts are a form of bar chart used to simplify trading. When used in trading, a TC creates a new bar each time a specific/given amount of transaction is executed. A TC differs from a time-based chart, which creates a new bar based on a fixed time interval. They are usually used for trading futures.

Many refer to a ‘tick chart’ as a day trading chart that can measure transactions effectively. Those who use tick charts say that they are useful for many reasons.

Tick Charts are simple and useful for gauging a trading pattern’s highest momentum and strength. This helps individuals make the most of their trading by identifying the right patterns for profit maximization and basing their judgments and moves on them.

By striking the right cord, based on these patterns, a day trader can benefit by maximum measure. Tick charts are also useful because they help in measuring transactions peculiarly.

TC’s measure the number of transactions per bar. You can select charts of different sizes; however, the Fibonacci time frame chart is the most popular.

TCs are used by those dealing in Forex markets; they are used for futures contracts (especially the euro vs. dollar) and other purposes.

Benefits of Using Tick Charts

After understanding what a tick chart is, the next step is to understand the benefits of it. Tick charts are very popular and have many benefits to offer. These include the following:

  1. Noise reduction
  2. Smart money coming in
  3. Simplify your trading
  4. Trend changes
  5. Works great with Wofle Waves

Noise Reduction

TC’s reduce the noise present in a time-based chart. When the market is slow during pre-market time or lunchtime, tick bars assess and present an acute picture of where you should be trading to make the right start.

When the market is active, tick charts clear the clutter and show where you should trade above or below it, according to the pre-market value, to ensure maximum results.

Tick charts help assess both micro-trends and macro-trends to clear the noise and help you make the right decisions based on the true market volatility and movement.

Let’s look at the other benefits of using a TC. 

What Does a Tick Chart Tell You?

What does a tick chart tell you? It measures the minimum up or down movement in price. Another thing it’ll tell you is the change in price from one trade to another. It’s used a lot in Futures trading.

Many traders wait for smart money to come into the market to make smart moves and capitalize on their gains.

When you combine the volume of a movement with a TC, every tick bar becomes equal. This will help you assess the price movements and see those with higher volumes and those without. Then, you can assess and make your moves accordingly.

They help you identify smart and retail money to help you decide which one to go for.

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How to Read a Tick Chart

After establishing ‘what a tick chart is in trading,’ the next step is understanding how to read it.

They have four signals: ‘open,’ ‘close,’ ‘high,’ and ‘low.’

While ‘open’ indicates when the trade opened, ‘ close, ‘ on the other hand, indicates when the trade closed.

Moreover,’ high’ is the highest value of a given trade, and ‘low’ is the lowest value. Try them out with divergence trading, another trading strategy.

Simplify Trading

Pre-market trading and after-hours trading are always difficult. They help identify and understand what goes ‘outside’ a market session.

During pre-market and after-hours, the volume traded is thin and specific; however, it is combined. With tick bars, this momentum can develop a pattern and significance so that you can trade and make specific gains.

This can be helpful for your intraday chart setup.

Bullish Tick Chart Example

2000 Tick Chart
A 2000 tick chart is used for shorter scalps, intraday.

Bearish Tick Chart Example

Bearish Tick Chart

Bearish Tick Chart Price Action Example

Assessing Trends

Another benefit of using a tick chart is to see when trends wear out. To answer what a tick chart is in trading, this is another measure that can help you understand.

All markets go through a period of range expansion and contraction. Markets contract as much as they expand. They can help identify a useful and insignificant trend to clear clutter and make trading moves wisely.

TC’s simplify trading, use slow-range bound markets, and help traders identify specific market trends and capitalize on them.

They are, therefore, helpful and useful and go a long way in helping traders in every capacity, especially with support and resistance levels.

Tick Charts vs Bar Charts

1. Tick Charts: Set Number of Trades

Tick charts are based on a set number of trades, or “ticks,” that occur within a specified period. It creates a new bar or candlestick following a certain number of ticks rather than based on a fixed period, such as one minute or one hour. 

For example, a 100-tick chart creates a new bar or candlestick for every 100 trades, regardless of how long it takes to complete those 100 trades.

2. Bar Charts: Based on a Fixed Period

On the other hand, bar charts are based on a fixed period. Furthermore, a new bar was created at the end of that period, regardless of the number of trades that occurred. For example, on a one-minute bar chart, a new bar is created at the end of each minute, regardless of whether there were a few trades or many trades during that time.

3. Price Movement

One of the main differences between tick charts and bar charts is how they display price movement. They have a smoother look, with fewer bars that eliminate “noise” in the data. Hence, they are popular among traders focusing on short-term price movements and scalping

On the other hand, bar charts may have more bars or candlesticks within a fixed period, providing more detail on price movement, but may also have more noise in the data.

Another difference between the two chart types is how they display volume. On a TC, volume is typically represented by the number of trades within a specified number of ticks. Alternatively, bar charts represent the total volume within that fixed period. Because of this, bar charts help identify changes in trading volume alongside price movements.

4. How to Pick the Chart You Want

The choice of chart type depends on personal preference, trading style, and the kind of market being analyzed and traded. Some traders may find tick charts useful for scalping or day trading, while others may prefer the detail provided by bar charts. Understanding the differences between the two chart types is essential to determine which chart works best for your trading style. 

Final Thoughts: What Is a Tick Chart?

Tick charts are known to represent the same data differently. They are concise, assistive, and short. They help trade effectively and allow you to make the right trading moves.

After sorting out data for you precisely and concisely, they can help you make instant decisions based on acute data. Without market noise and distortion, you can make the right decisions and make the most out of your trades.

Tick charts are known to help you make the right entries. They help you assess data based on the right time, which most trading is all about, and allow you to move ahead by picking and choosing your trades wisely.

Frequently Asked Questions

Scalping is better with a 50-tick chart or less. The 1000 and 2000 tick charts are the most popular for day trading.

Tick charts are found within any major online broker's platforms. Popular tick charts are the 1000 and 2000 ticks. Most platforms are customizable to change timeframes.

A 500 tick chart makes a new bar after 500 trades were made. It's the set number of trades within a bar.

Yes, for some. Tick charts are a must for short-term traders who need to capture high volatility and rapid price movements. They give a detailed view of price action in highly volatile markets, helping short-term traders make informed, instantaneous trading decisions.

They are based on a set number of trades, or "ticks," that occur within a specified period. Bar charts, on the other hand, are based on a fixed time period, and a new bar is created at the end of that time period, regardless of the number of trades that occur within that period. 

More Frequently Asked Questions

It really depends on the type of trading you want to do. Scalpers who aim to capitalize on quick price movements may prefer smaller tick settings, such as 100 or 200 ticks, to capture rapid price changes. On the other hand, swing traders or position traders may opt for larger tick settings, such as 500 or 1000 ticks, to focus on longer-term price trends. There's really no one size fits all approach.

A tick chart displays price action based on the number of trades rather than a specific time interval. Each tick on the chart represents a specific number of trades, such as 100, 200, or 500 trades. A volume chart, on the other hand, represents price action based on the trading volume that occurs within a specific time frame. Each bar on the volume chart represents a set amount of trading volume, such as 1,000 shares or contracts.

Not exactly. Some resourceful traders have developed custom scripts that enable this functionality. Click here to learn how they do it. 

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