Tick Charts - Tool for Active Traders

Tick Charts Definition

Tick charts display a certain number of trades before printing a new bar chart.  Unlike other charts which are based on time, tick charts are solely based on trading activity.  Tick charts are a favorite for day traders who need to make quick trading decisions and do not have the time to wait for a 5-minute bar to close before making the call to sell their stock.   Tick charts can provide a wealth of information about the details of the trading activity, but it can also create a lot of noise.

Benefits of Tick Chart

Tick charts provide the visual depiction of the time and sales window.  Day traders will look at the time and sales and level-II windows to assess when a stock has run out of steam during a breakout.  The tick chart gives the day trader the ability to see all of this detail within the price chart and removes the headaches that come from staring at the ticker all day. 

Most Popular Tick Chart Trading Time Frame

233 ticks is the most popular tick chart trading timeframe.  This is because it is part of the fibonacci series: 0,1,1,2,3,5,8,13,21,34,55,89,144,233.  Whether 233 is the most accurate because of the fibonacci element or if its a self-fulfilling prophecy is irrelevant, all that matters is its the most widely used amongst day traders around the globe.

Importance of Volume with Tick Charts

Tick Charts only display the number of trades that take place.  For example, if there are 233 trades per bar, one would want to know if there are millions of shares traded or just a few thousand.  This information is displayed to the day trader in the form of volume on the chart.  Without the volume, you only have a small piece of the puzzle.