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3 Professional Scalping Trading Strategies With TICK Index (Used by Pros to Beat the Markets) - YouTube
Channel: The Secret Mindset
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TICK index is a very short-term (intraday)
indicator that measures the bullish or bearish
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activity in New York Stock Exchange (NYSE)
stocks throughout the day.
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The TICK is an indicator that gives traders
an intraday look at the “internal” strength
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or weakness of the market— that is, the
strength or weakness beyond whether the overall
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market is up on a point or percentage basis.
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By comparing the number of stocks advancing
to stocks declining, the indicator reflects
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the market’s up or down momentum at a given
moment.
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So TICK measures the difference between the
number of New York Stock Exchange (NYSE) stocks
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trading on an uptick (meaning, last price
higher than the previous price) and the number
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of stocks trading on a downtick (last price
lower than the previous price).
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For example, if at a given moment 5,200 stocks
were trading up from their previous prices
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and 4,800 were trading down from their previous
prices, the TICK reading would be +400 (5,200-4,800).
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Positive, rising TICK readings are a bullish
signal; the opposite is true for a negative,
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declining TICK.
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(However, very high or low TICK readings often
indicate temporary market exhaustion.)
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A declining TICK in a rising market indicates
stocks are beginning to trade off their highs,
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signifying the uptrend may reverse, at least
temporarily.
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Likewise, a rising TICK in a declining market
indicates stocks are starting to trade off
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their lows, and a reversal of the downtrend
is possible.
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Let's step back and look at the big picture.
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Why is TICK important?
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How is this relevant to you as a day trader
or scalper and why you need to pay attention
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to TICK.
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Well, because the TICK index is recording
the buying and selling action of an entire
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index.
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This tells us how many stocks are selling
"at or below" asking price and how many stocks
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are being bought "at or above asking price".
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It tells you how aggressive are buyers overall
"at one moment in time".
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If all major markets suddenly have aggressive
sellers, then you would want to know this
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and maybe not take a position until you found
out why.
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If all the markets suddenly have aggressive
buyers, then perhaps a highly liquid ETF like
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$SPY will be in play for a quick scalping
play.
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There's momentum created by this sudden buyers'
market.
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So, how to read TICK index
TICK offers traders a short-term perspective
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of overall market SENTIMENT.
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This is extremely valuable for scalping trades.
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The ratio of stocks on an up-tick versus the
number of stocks on a down-tick present a
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short-term actionable point.
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TICK Index value between +200 and -300 indicate
a neutral market sentiment.
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Bullish is when values become higher than
+200 and bearish when it is lower -300.
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Very bullish is when its value is higher than
+500 and very bearish when it is lower than
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-500.
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And TICK values higher than +1000 or lower
than -1000 indicate extreme conditions, and
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a reversal or correction of the market is
likely.
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When confirmed with other tools, TICK readings
can be used to identify intraday turning points.
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Let’s look at a few strategies that combine
TICK index with price patterns and important
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market levels.
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First strategy.
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TICK Range Trading
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TICK overbought and oversold levels can vary
depending on conditions.
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A reading above +500 indicates an overbought
condition and a reading below –500 indicates
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an oversold market.
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Readings above +1000 or below –1000 are
extreme conditions and we will try to concentrate
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our attention on these levels.
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A simple trading approach is to place trades
when the TICK signals an overbought or oversold
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market as price is testing the support or
resistance levels of a trading range.
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Here we have a one minute chart with a resistance
zone (established by these swing highs).
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As the market traded into this resistance
zone, the TICK moved above +1000, signaling
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an overbought market.
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Price then rejected that area, and the TICK
indicator turned down.
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A short sale would have been placed when price
dropped back below the resistance level.
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A protective stop would be placed just above
the high of rejection, which is the top of
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this swing move.
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Here’s an important point: you must scalp
these overbought or oversold readings only
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if the price is at an important key level
in the market.
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You don’t trade simply because the TICK
is at 1000 or -1000.
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Use it in conjunction with price.
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Here are several valid TICK trades, around
support/resistance levels.
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The second strategy involves TICK divergences
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TICK divergence setups are probably the most
popular use of the TICK indicator.
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Divergences between price and the TICK occur
when price makes a higher high (or lower low)
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and the TICK makes a lower high (or higher
low).
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These signals are often followed by short
term reversals or corrections.
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In this example, after a swing to the upside,
the price again retested its intraday high
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at the upper end of the resistance zone, and
the TICK exceeded +1000.
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However, this TICK overbought high was lower
than the previous TICK overbought high.
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This divergence between price and the TICK
meant the market was rallying with fewer stocks
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making upticks — a sign of internal weakness
— and set up another short sale opportunity
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when price dropped back below the lower resistance
level.
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In the case of a long TICK divergence signal,
price makes a new low but the TICK indicator
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makes a higher low.
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In this example, price fell to a new low but
the corresponding TICK low was higher than
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its previous intraday low.
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A long trade would have been entered when
price traded back above the first low just,
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with a stop placed below the most recent low.
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As always, keep an eye on ley levels.
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If a divergence occurs at an important area,
it has a better chance of completion.
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Also, wait for a trendline breakout to increase
our chances of a successful trade.
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This way, you will also filter some bad divergences
signals.
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Here are some valid TICK divergence trades.
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The third strategy involves a zero line crossing
of TICK index
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In addition to its usefulness in trading ranges,
the TICK can also set up trades in trending
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markets.
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In a strong uptrend, any countertrend movement
is usually marked by the TICK fluctuating
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between –100 and +100.
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In these situations,–100 becomes the oversold
level.
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More often than not, the TICK tests the zero
line.
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These tests offer opportunities to enter in
the direction of the prevailing trend.
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In this example, SPY was in an uptrend and
the TICK reached an overbought level above
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+500, which indicates a strong, uptrending
market.
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In such a situation, the goal is to buy on
a pullback.
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As we talked in previous strategies about
key levels, let’s use a FIB retracement
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to confirm the zero line crossover.
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As the TICK dropped below zero, price also
reached the 50 percent Fibonacci retracement
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line.
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The combination of the TICK oversold signal
and the 50 percent retracement offered a higher
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probability for an up move.
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You can also use this technique with pivot
points.
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In this example, we have a downtrend, the
TICK moved toward the 0 level and the price
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stopped at this pivot line.
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You can also add a moving average, to confirm
better the short term trend.
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Here are other examples of TICK zero line
crossover trades, at the 50% Fib level.
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The TICK Index offers traders the advantage
of observing market sentiment for a short
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period of time.
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This gives a small window into an opportunity
for a trade.
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It also gives an opportunity to NOT take a
trade.
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Patience is required when trading this setup.
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The TICK should be given time to bottom out
in an uptrend or top out in a downtrend; and
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don’t expect a sudden price reversal when
the TICK indicator simply hits the zero line.
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Other technical factors should be consulted
before entering any trades, such as employing
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a price pattern, as presented in the previous
examples.
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So the TICK indicator should be used to set
up or confirm a trade, not as a stand-alone
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tool.
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By utilizing the TICK in conjunction with
price patterns, technical indicators, and
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in the context of the overall trend and market
environment, you can make better buy and sell
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decisions.
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As always, if you learned something new and
found value, leave us a like to show your
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Until next time.
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