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The Pros and Cons of Tick and Time-Based Charts

Read this… Brokers. How to trade news on the Forex market Analysis. GOLD — on a demand zone, will the metal shine again? GOLD — a bullish correction due to engulfing pattern — The Comparic.

Tick Charts Explained Simply and Understandably

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Trading with X tick charts: the hidden secret of successful traders

Particular consideration should be given to financial instruments based on margin trading, in particular, Forex currency exchange instruments FOReign EXchange , futures and CFDs Contract for Difference. Let's zoom on the time period of April 23rd to April 27th and take a closer look at the candles. If the market is active, the classical view might sometimes not be "fast" enough.

Sharp drops and increases of the price will be displayed as one large candle, even if you choose a rather small view like 1 minute. You find an example for this case in the image above.

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You can see that in the 2 hour chart several small candles common during the night and several long candles common during the day are displayed. A trendline can be drawn between the 23th and the 25th, but will not indicate the trend change that takes place on the 25th and the 27th. You would actually need to draw two lines, which makes it even more difficult to decide where the trend might go. In the x ticks view, the long candles are divided into smaller tick bars. A strong resistance line can be drawn from the 23rd until the 27th, which allows you to better understand the trend during these days.

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We will keep looking at the same time period, but discuss another aspect of the candles in x ticks view. In times with only little buying and selling activity, like before the close of the market or around noon, the classic 2 hour view will show several unimportant candles that will give you no major information as you can see in the bottom chart of the example above.

That is not the case in the x ticks view, which shows more candles during days of high activity and less during days when the market is calm. For instance, on the 27th the x ticks view displays 32 candles while the day before it only displayed 16 candles.

Tick Chart vs. One-Minute Chart for Day Trading

As mentioned before, support and resistance lines can be very different in the two views. But what does that mean exactly? Let's imagine that we were trying to enter the market on May 4th if a bullish signal was confirmed. The image above shows a 2 hour chart and a tick chart, which display roughly the same amount of candles.

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If we draw the main resistance trendline on both charts, we see that there is a significant break of the trendline on May 5th on the 2 hour chart. Many market participants might go long, assuming that this is the start of a new bullish trend. In the x ticks view, the trendline holds. If you had been looking at both charts, you would have most likely waited until you would have been able to detect a clear trend underneath or above the resistance trendline.

Imagine you are trading the Euro Bund Future in real-time, with the information we have on the 25th at am on the chart below.

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So let's take a closer look at the chart by choosing a 1 minute view and tick view as shown in the picture below. At around am the Euro Bund Future drops. This drop, displayed as one long candle in the 1 minute chart, is divided into several smaller candles in the x ticks view: this allows you to draw a different support line compared to the one you get from the 1 minute view.

The 1 minute chart displays again one long candle at We sell and the market goes in the right direction for us. A few minutes later, a trader that works with the 1 minute view only, is faced with two options: hoping that the price will fall further, without having any indication when and if the trend might turn, or to exit the market and wait for better times. Unfortunately for this trader, both choices are only based on emotions.

Imagine how frustrating it would be, if you had exited the market because you wanted to break even with your losses of the previous days, but the market actually falls much further. On the other hand, imagine how frustrating it would be, if you had kept the selling position and the trend changed and you lost the money you just earned. Meanwhile, the fortunate trader that works with both views, can apply the results of his technical analysis to make his choice.

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For instance at am he may decide to buy half of his selling position, because the price just touched the main support trendline. He would exit the market at right time and increase his profit. It will give you no indication if the security was bought or sold by major players or private investors. If you choose a 5 tick view, you could do the following calculation to find out about the value of the volume bar:.