Using the TICK to Time Entries on a Trend Day

Bycjrosen

Trend Days are more common now than they used to, and so it’s a good idea to look for methods to be more profitable when they occur.  Let’s look at how the TICK can be used to time entries into an established Trend Day.

We could have suspected a Trend Day was forming early on, from the morning announcement that the Government refused to bail out General Motors (GM) (a big news event) and from the morning’s large-scale opening gap that did not fill.  Also, the TICK began the morning with a -1,400 reading.

The TICK is the number of NYSE stocks registering an uptick vs those registering a downtick.

In this chart, I’m showing the 1-minute chart (compressed) with volatility (swing) Color Bars (a function of the average true range).

The trade set-up occurs when the TICK registers a high above 0 (and then later at +500 as the day progressed) and then turned down from that level.  I have the 0 TICK line marked for clarity (along with the -1,000).  The Green color helps time entries – in a downtrend, sell up-swings.  The green color helps clarify what constitutes an upswing.

You can exit when the TICK makes a reading near -1,000, or you can hold all positions (expecting a trend day) until certain moving averages or a trendline (that connects the highs) is broken.  These exit signals occurred as price broke above the Trendline and made consistent new TICK highs towards the last hour of the day.

Try to keep things as simple as possible – remember that most indicators (oscillators in particular) fail on Trend Days because they either give you false divergence signals or they stay overbought/oversold all day long, both of which tempt you to trade counter-trend on a trend-day which is the least profitable strategy.

Early identification of a Trend Day as it develops is key, and you might not be sure until noon, but once you feel price structure has developed enough, only trade in the direction of the trend that is developing.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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13 Comments

  1. I’m not sure Monday qualifies as a good example of a trend day since one of the requirements, a close near the opposite end of the daily bar from the open, is missing. Now if the market had closed at 2:00 then we’re talking textbook trend day!

  3. are the volatility swing color bars something you programed into yourself or are they offered by your charting package as a standard feature.

    If you could elaborate on the way these are generated, that would be very appreciated.

    Thanks

  4. Andrew,

    True, but not all Trend Days will be clean – most will be messy. If it were so easy, we’d all be billionaires 🙂

    I was showing odds and probabilities and decent ‘do the best you can’ set-ups in an environment of uncertainty – like this one – which flipped on you at the end of the day.

  6. Mark,

    They’re based on a price swing/volatility formula developed by Welles Wilder though the coding is done through Linda Raschke’s LBR Group – it’s an indicator I purchased through them (which is why I can’t share the formula behind it).

    It’s a volatility function based on the Average True Range taken from swing highs and lows. The bar changes color once a threshold is met.

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  9. Nice setup. I myself use bollinger bands 2,5 std.dev on the tick to find the entry on a trendday. For example if it is an up day I go long everytime the tick hits the lower band an exit on +1000..

  10. hello
    I was looking at the tick chart and it looks like it starts before 9:30
    is that possible?

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