You should always be looking to improve your trading edge. The NYSE Tick is the perfect trading indicator to do just that.
It is one of the easiest indicators to implement into any trading strategy and instantly see results.
In this post you will learn how to read the NYSE Tick indicator to help time your trades better, resulting in more profit.
What Is a Tick Index?
A tick is the minimum movement either up or down of a security.
Since 2001 the minimum movement for stocks trading above $1 has been 1 cent.
If you trade Forex, a tick is similar to a pip which is equal to 0.0001 for currencies that are traded to 4 decimal places.
Future contracts have different tick values depending on the security your trading. You can look up contract specs for eMini products at http://www.cmegroup.com/.
A security is considered to be on an uptick when the last price traded is higher than the previous price. (A trader took the offer)
For example, the last trade on Microsoft (MSFT) was $60.10 and the trade prior to that was at $60.09. TMSFT would currently be on an uptick.
Opposite of an uptick, a security is considered to be on a downtick when the last price traded is lower than the previous price. (A trader hit the bid)
For example, the last trade on MSFT was $60.25 and the trade prior to that was at $60.26. MSFT would currently be on a downtick.
NYSE Tick Index
The chart above is a one minute chart for the Nyse Tick. ($TICK on ThinkOrSwim)
Note: You can get my nyse tick chart layouts for thinkorswim or sierra charts at the end of this post.
The green line represents the high for the day and the red line the low for the day. I also include a 1 minute exponential moving average to help see the overall trend better.
The NYSE Tick Index is calculated by taking all the NYSE stocks on upticks, less all of the NYSE stocks on downticks.
For example, the New York Stock Exchange has about 2800 stocks. If 1800 of those stocks are on an uptick, and 1000 on a downtick, the NYSE Tick reading at that moment would be +1000.
This provides you with a view of market bias in the short term.
Key Tick Levels
Market bias is considered to be neutral when the tick reading is close to zero. During a neutral bias the number of traders taking the offer (buying) and hitting the bid (selling) is balanced.
A positive tick count signals bullish sentiment and a negative tick count signals bearish sentiment.
What’s really happening when we have a positive or negative tick count?
When markets are going up traders are taking the offer, resulting in more upticks than downticks. This leads to a positive tick count and bullish sentiment.
When markets are going down traders are hitting the bid, resulting in more downticks than upticks. Can you guess what this leads to? Yes, a negative tick count and bearish sentiment.
I personally consider a tick reading over 500 as bullish and below -500 as bearish on low volatility days. (Notated by the horizontal purple lines on chart above)
On higher volatility days you can expect bigger swings in the tick index. On such days I look for tick counts above 1000 and below -1000.
Determining volatility is quite easy.
You can set expectations on market volatility by examining the following three things.
- Premarket: Are we opening above yesterday’s high or below yesterday’s low? If so you should expect higher volatility on the open and be looking for larger tick extremes.
- The Open: Examine the range on the NYSE Tick in the first 15 to 30 minutes. If the tick index is between +500 to -500 it’s more likely to be a lower volatility session. Thus any tick counts exceeding +500 or -500 are going to be more relevant.
- Number of Tick Extremes: If the tick tick count breaks the 500 and -500 levels multiple times, expect higher volatility. Thus, look for larger tick extremes.
On the chart above you can see a tick reading of +1460 in the opening minutes as well as multiple breaks of the +500 and -500 level.
On a day like this you can expect higher volatility and should increase your expectation of a tick extreme to +1000 or -1000.
On lower volatility days you will see the majority of tick readings within the +500 to -500 range as seen above.
On such days expect lower volatility and readings outside of the range should be considered more relevant.
How To Trade Using The NYSE Tick
You can incorporate the NYSE Tick into any trading system as a validation tool. Let’s take a look as some examples of how to do this.
Intraday Tick Highs & Lows
Whether you’re a trend trader or a countertrend trader you will want to pay close attention to intraday high and low tick readings.
What typically happens at a market reversal?
Price goes up or down to an extreme where traders who are in losing positions will have to puke out and exit. Furthermore, traders not in positions will hop on board and chase the move. DOUBLE WHAMMY!
The result is a high tick reading signaling a potential reversal, which is exactly what we’re looking for.
Let’s look at an example.
On the 1 minute chart above you can see the ES (eMini S&P 500) traded to new lows on the day while the NYSE Tick also made new lows at -743. (Highlighted by blue box)
The chart inside the green box is a 5 minute chart of the ES showing the overall weak trend and price at lows of the day.
I would react to this chart in the following ways:
- A low tick at low price of the day could be a major reversal. I most likely won’t go short if I’m flat at this point.
- If I’m already short, I would want to tighten my stop realizing a reversal may be coming.
- If my trading strategy signals a long position it’s validated due to the fact that we just hit a new low with a low tick which signals a potential reversal.
- I’m won’t just go blindly long, it has to line up with my trading strategy. The very next move could be lower with an even lower tick count.
Still with me? Here’s the biggest take away…
- When you see the NYSE Tick sets a new high at highs for the day be cautious when going long. Same with price hitting new lows for the day as well as the NYSE Tick, be cautious when going short.
- If your strategy signals a long position which is validated by a low NYSE Tick reading at lows for the day, look for a larger profit as the trade may have room to run. Look to do the same on the short side when your strategy signals a short after a high tick reading. (As seen below)
Nyse Tick Divergence
Trends are composed of price swings. In an uptrend price will make higher highs followed by lower lows. In a downtrend price will make lower lows followed by lower highs.
We use the NYSE Tick Index to determine when momentum is slowing down.
If price is making higher highs (HH), the nyse tick index should also be making higher highs (HH). If the price is making lower lows (LL), the tick index should also be making lower lows (LL).
If they’re NOT, then price and the nyse tick are diverging from each other, thus “divergence”.
There are two types of divergence, regular and hidden.
Regular divergence is used to spot a potential trend reversal. When regular divergence occurs, it’s a sign that momentum is slowing down and a potential reversal may be coming.
There are two types of regular divergences: bullish and bearish. Let’s look at an example of both.
On the chart above the ES is breaking to higher highs while the NYSE tick is making lower highs, an example of bearish divergence.
When price broke to new highs the NYSE Tick didn’t follow through to new highs, signaling momentum is slowing.
Simply put less traders were taking the offer at new highs when compared to the previous high.
If less people are interested in buying at the new high, momentum is obviously slowing down signaling a potential reversal.
If price is making lower lows and the NYSE Tick is making higher lows, you have regular bullish divergence as seen below.
You can also use divergences to spot a trend continuation known as hidden divergence. Once again hidden divergence can be both bullish and bearish.
Bearish Hidden Divergence
On the chart above the ES made lower highs while the NYSE Tick made higher highs.
Even though the bulls stepped in with more effort than the previous rally (seen by the higher tick count), they couldn’t take price to new highs.
Sellers stepped in on the offer preventing the rally signaling a continuation of the downtrend.
Bullish Hidden Divergence
Other Tick Indicators
There are several tick indexes depending on what markets you trade.
$TICK – NYSE Tick Index
$TICKQ – NASDAQ Tick Index
$TICKA – Amex Tick Index
I personally use the NYSE Tick even though I trade multiple markets such as the eMini Nasdaq 100, S&P 500, and Dow. Feel free to check them all out.
Markets to Trade with NYSE Tick
I use the NYSE Tick to trade the S&P 500 and the Nasdaq 100. I prefer day trading Futures due to the tax advantages here in the United States as well as the liquidity of both markets.
You can use the NYSE tick to trade individual stocks, futures, forex, oil, gold, and much more. Realize the correlations between the NYSE tick and markets like Forex or Gold are going to be different when compared to a market like the S&P 500.
As an example, the correlation between the S&P 500 and the U.S. Dollar since 2011 has been .38.
Thus, as the value of the U.S. dollar increases, so do stock indexes, but only by a certain amount.
Obviously you’re going to see a higher correlation between the NYSE Tick and the S&P 500 than other securities, but it can still be used across the board.
NYSE TICK INDICATOR Downloads
ThinkOrSwim – ThinkOrSwim platform is free for U.S. clients once you register, you don’t actually have to fund your account. DOWNLOAD my Nyse Tick ThinkorSwim Indicator Here.
Sierra Charts – Sierra Charts are what I personally use to trade. They are extremely robust and very light weight. DOWNLOAD my Sierra Chart Nyse Tick Layout Here.
The NYSE Tick is a powerful tool to help you determine short term momentum.
You can use it to spot trend reversals with regular divergence and trend continuations with hidden divergence.
The NYSE Tick is a great validation tool to confirm your trade signals.
Start by simply adding it to your charts and paying attention to it. It will take some time to be able to read the tick count but you will begin to notice how it can play an important role in your trading strategy.
In time, it will greatly improve your order entries, increasing your profits and keeping you out of false moves.
If you have any questions on the NYSE Tick make sure to leave a comment below!