Wednesday, May 21, 2008

Using The TICK For Profitable Trading

The NYSE TICK (ticker symbol ^tick at or $tick at gives a net difference between stocks moving up against those on the decline, and it could help provide an edge for short term traders. As this indicator moves in a mean reverting fashion, interim emotional buying and selling become easier to identify.

Applying TICK for profitable trading

Naturally, you want to buy if TICK closed at extremely low levels the previous day, and vice versa. However there is more, and I will provide an example for a buying opportunity.

Alongside a low TICK value, this usually means below -800 for me, price action also matters. If accompanied by a dip in the indexes, then an opportunity is present for a buying entry. On the open of the next day, get in ONLY if price opens below the close of the previous day.

The opposite works for short positions. This scheme provides a slight edge for the learning trader. If liquidated at the end of the days, these theoretical opened positions would have all ended profitably for the past two months on the SPY (see above graphs). Yes it takes a heck of a lot of patience to trade it, well at least it would help your trading performance in the positive while the search for high returns goes on.

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