Understanding the TICK

[Soultrader 12]

NYSE TICK: The TICK is the numbers of upticks on the NYSE versus the number of downticks on the NYSE. For example, if 1000 stocks are ticking up and 400 stocks are ticking down you will get a TICK reading of +600. The TICK is a tool for understanding market internals.

 

One of the best ways to use the TICK is to fade the extremes. A TICK reading of -1000 or -1200 is fairly rare but when they do happen, it is usually a good fading opportunity. The markets will usually bounce after such extreme negative readings. The TICK can also help you from chasing the markets. Instead buying when the TICK is reaching +1000, buy the pullback of the TICK. Wait for a retracement of the TICK back to the zero line and buy the moment the TICK hooks back up at the zero line.

 

The TICK is sort of like the engine and price the car. If the TICKS are heading upwards but price can not lift, this is a clue of market weakness. Ideally you want both TICK and price to follow each other. If TICK makes a new high, you would prefer to see price making a new high. If price can not, you will have a TICK and price divergence and a good fading opportunity.

 

I will also bracket the TICK extremes. I plot a horizontal line across the low and high TICK readings. If I am long a position and the TICKS reach the upper extreme for the day, I will look to close out at least 3/4 of my position.

 

I hope this gives you a brief idea on the NYSE TICK. Feel free to post any questions regarding the TICK and trading setups using the TICK. Thanks

[Soultrader 12]

Chart example of the TICK's in action. Anytime you have the TICK spending 90% or more time above zero in the morning session, expect a continuation of the trend in the afternoon session.

 

This works on a uptrending day. The TICK, regardless of a downtrend or uptrend will usually spend more time above zero. Therefore, a downtrend can occur with the TICK fluctuating both ways.

 

[Lisa 10]

Is it common to see TICK's trade above zero during the entire trading session? I have been watching it closely the last few trading days and it seems to be the norm. Also, how do you judge whether the TICK will spend their time above zero or below zero prior to the trading day?

[Soultrader 12]

  Lisa said:

Is it common to see TICK's trade above zero during the entire trading session? I have been watching it closely the last few trading days and it seems to be the norm. Also, how do you judge whether the TICK will spend their time above zero or below zero prior to the trading day?

 

Predicting the TICK's prior to the trading would be too magical. In fact, I will pay good money for a TICK forecasting tool. The majority of the time, the TICK will spend time above and below zero fairly equally. Last week was definitely not the norm but the exception. We had higher value placement every single day of the week keeping the TICK's strong. In general, even on a downtrending day the TICK will rotate above and below the zero line. This is normal TICK behavior.

 

One way to predict the TICK is by watching it in the morning session. If TICK's trade above zero over 90% of the time in the morning session, expect to see similar behavior in the afternoon session. Also, another method I use in prediciting the TICK is to bracket the highs and lows. Whenever there is a breakout of the TICK range, you can expect a shift in market sentiment. For example, let's say the TICK was trading between +600 and -600 for the last 2 hours. If the TICK makes a new high at +1000, there is a high probability of a shift in market sentiment. The TICK's may start to spend more time above zero. Hope this helps.