E-mini Trading: Use The Nyse Tick To Improve Results
Leading indicators are few and far between for traders looking to gain an edge in the e-mini markets
. Retail traders spend the majority of their time focusing on lagging indicators such as MACDs or Bollinger Bands. These indicators do more harm than good for the uneducated trader. Professional traders know that in order to get an edge in the market they need to use the NYSE TICK chart to get a read on future market sentiment.
The NYSE TICK chart is available in all the major charting and data feed packages provided by brokers. The actual chart itself is very basic in its mathematically components. The chart plots the ratio between the up ticking vs. the down ticking stocks on the New York Stock Exchange. In short, the more stocks ticking up the higher the number will be on the chart. The more stocks ticking down, the lower the number on the chart will be.
Experienced e-mini traders use the chart in a variety of ways but the simplest way to understand its benefits is to use the chart to identify extreme overbought and oversold market conditions. Theory has it that when tick extremes (readings +/- 1000) occur, the market has reached a peak in buying or selling pressure and will not be able to maintain that pressure. Therefore a retracement must occur. Traders will then fade the market until the market has been fully corrected and take the profits from there.
Computer programs, trading based on market algorithms, are heavily correlated with TICK readings which means when TICK extremes are reached there is a large amount of participation from institutional money. The edge traders get from the TICK chart is knowing when institutional money is likely to come in and reverse the short term sentiment.
Armed with that knowledge traders are able to spot where price is likely to bounce off of, at least initially, before continuing or reversing on a larger time frame. If traders know when to anticipate a bounce they can use that knowledge to get in before the computer programs.
Traders in the modern electronic market must utilize every advantage they can find and the NYSE TICK is one such edge. Study its movements and incorporate it into your trading arsenal and sooner or later you will see it start to improve your trading skills.