Forex tick charts and why you shouldn’t use them
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About Tick Charts What are tick charts Charts used for day trading can be based on several different criteria, some of them being time, ticks, price range or volume. Tick based charts represent price change during given number of transactions on the market.
A chart drawing a bar after every 30 transaction is often referred to as a tick chart. Benefits Using tick charts exclusively or in combination with the classic intraday time-based view could enrich your chart analysis and provide you with some additional information. One of these additional information is the correlation between market volume and price development.
As tick charts are transaction based and make new bars only when there have been enough trades, they adjust to the market and draw more bars in case of high activity.
This helps to notice momentum and increasing volatility. The same way during low activity periods like noon or after-hours tick charts only display a few bars as opposed to time based charts where you'll usually see a row of smaller less important candles.
Without this accumulation of small candles tick charts make it easier to spot trends and properly identify real support and resistance levels. This might be especially helpful for traders scalping. As an addition looking at tick charts from different data feeds you will notice that none of them are the same.
The reason is that tick charts are based on the number of completed transactions, however this number can change because of some factors like: Some prefer charts with 33, or ticks, others choose from fibonacci numbers like 13, 21, 34, 55, 89, etc. Then he would be able to see when the market volume changes during high or slow activity periods and trade accordingly.
There is no best time timeframe to recommend. There are different people with different strategies and after some experimentation and evaluation everyone will be able to pick a tick chart time frame that suits them best. How to trade using tick charts Just as with any other chart types there are many trading strategies using tick charts. One could prefer tick charts for day trading while another would use tick charts for price action scalping.
You need to look around on the internet, experiment and find or develop your own one that suits you the best.
If you are interested in trading Forex and scalping, you might also want to check out the book Forex Price Action Scalping by Bob Volman. Bob is an independent, professional trader who uses tick charts to trade the EURUSD currency pair at Forex and in his book he leads you into the world of professional scalping based on price action.