Tick BarsTechnical Analysis
Instead of printing bars based on a time period, tick bars print based on the amount of transactions per bar. New bars are completed only after a set number of trades. A 1000 tick bar prints after 1000 trades. You can use any tick number, but Fibonacci numbers are common.
The rate bars print implies the speed of the trader’s actions. In a period of high trading activity, bars will print at a faster rate. If there is less trading activity, bars will print slower. An increased printing rate means trading has accelerated, often due to new events affecting the underlying asset. Since tick bars will print after a set number of trades, accelerated trading can show you price movements that are occurring before you would see them in a time bar chart. Market reactions to news events often come quickly due to traders racing to align themselves on the correct side of the news for future profit. As a result, the confirmation generated by a bar’s close can come earlier than a time chart.
If you’re considering using tick charts, learn how your source delivers tick data. Tick feeds change based on the information feed provided by your broker or data source. Differing brokers filter and categorize transactions included in ticks in differing ways. They may also provide aggregated tick information to reserve connection costs, which sends bulk ticks data instead of true tick by tick delivery. Bulk delivery methods may not provide accurate per tick information.
When using Tick Bars, volume shows the amount of assets exchanged in the set of trades. A higher bar indicates higher volume within the same amount of transactions. This can indicate trades made by institutional traders, whose trades involve substantially higher amounts of assets. These traders often drive the market price, since they move large amounts of capital at one time. Trading in opposition to institutional players may result in losses due to their effect on supply and demand.
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