Tick Scalping & Tick Chart Trading – UPDATED 2022 – A Complete Guide

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Traders generally use a wide variety of charts to analyze markets, most of which are time-based.

Long-term traders rely on daily charts to get a bigger picture and hourly charts to plan their entry and exit.

Short-term traders go small like using 1-minute charts to stay on top of the price action. 

However, a tick chart allows trading on the smallest change in price to make high volumes of small profits. 

In this guide, let us learn more about tick charts, and the use of tick chart trading and tick scalping for forex traders.

Tick Scalping – A Complete Guide

Scalping is a trading style that focuses on making profits from small price movements.

A trader that uses scalping as his primary trading method makes a large number of trades per day and uses charts with a smaller time frame like one minute and tick to be able to see the trade setup as close to real-time as possible.

This trading strategy is known to turn out to be profitable if a strict exit strategy is implemented. 

A tick is essentially the minimum change in the price of an asset in the market.

This component does not consider the direction of price movement, the time in which the change occurred or the number of pips travelled.

The only thing that matters is that a price movement occurred as a result of a trade.

Tick charts help traders track down events at a point in time. 

Tick scalping can be executed on both short and long sides and scalpers should consider balancing long and short trades to get the best results.

Spotting the trend and momentum helps a trader make better profits by entering and exiting briefly in a repeated pattern.

Tick scalping is a non-directional strategy that works regardless of the market direction and there is little to no market risk involved. 

Getting Started With Tick Chart Scalping

Tick chart scalping implies using special charts built differently than the traditional bar or candlestick charts.

Such a strategy is used for trades opened and closed within seconds to reap smaller profits from each trade but benefit from a large number of positions throughout the day.

Unlike a time-based chart, tick charts create a new bar after a specific number of transactions, two popular forms of price based charts are the Renko bars and point and figure charts.

Below is an example of a tick chart.

Tick scalping and tick chart example

These charts provide an effective way to reduce market noise as every bar is created equal without any low activity bars. 

The most important consideration for getting started with tick chart scalping is to choose assets that have a minimal spread size.

Another consideration is the size of the leverage; the higher it is, the bigger is the profit a trader can make with tick charts.

As these charts have little to do with the market move, it is a good idea to combine them with volume.

This will allow seeing which price moves are supported by high volume and which aren’t, giving you a clear picture of what is happening in the market. 

Tick chart scalping helps understand whether the interest in an asset has grown stronger or weaker while volume indicator works as an additional advisory tool to analyze the existing market condition.

When volumes are expanding and low volatility sticks are formed, it is a pre-condition for price growth.

A trend continuation is indicated when the price grows against declining volumes. When the price grows along with volume, the price direction should be short-lived.

Expanding volumes against low volatility sticks indicate a price drop.

When the price drops and volumes rise, it should be a short-term trend.

If the price drop is accompanied by declining volumes, the trend should be long-term. 

Best Tick Chart For Scalping – UPDATED 2022

Traditional Forex charts only give the number of trades executed in a period and not the number of contracts. 

When volume is plotted on a tick chart, you don’t get the size of the trade volume.

It is best to stick with time-based charts if you want volume information.

However, a better option is to turn to futures Forex contracts traded on the CME. 

These contracts have significantly grown in recent years and today represent the forex market scenario.

The benefit of using futures contracts is the easy availability of volume data for the effective use of tick charts. 

Best Tick Chart Settings

There is no one best tick chart setting to trade with; different traders use different settings that seem to work for them.

When using tick charts for Forex, it is important to adjust the settings on the basis of the activity specific to the contract.

For example, the Euro is the most liquid market, tick charts like 500 tick, 1500 tick, and 4500 tick work well.

For less actively traded contracts like the Japanese Yen and the Australian dollar, 300 tick, 900 tick, and 2700 tick charts work perfectly. 

As the time element gets eliminated with tick charts, you can test with different settings to find the right match.

Some traders prefer to use charts with 50, 100, 200, 500, or 1000 ticks while others use Fibonacci numbers for settings like 21, 55, 144, 233, etc. for the number of ticks.

An ideal approach is to choose the settings in comparison to a time-based chart. For scalping, charts with 34 or 50 ticks should best suit. 

Risks of Tick Chart Trading

While tick charts offer several advantages for day trading and scalping strategies, they come with certain risks.

Firstly, these charts can move too fast in times of high activity, giving you little time to react.

Tick charts can give you an edge in day trading rules but can be expensive because not many brokers offer free tick data.

Finding quality data can involve a cost and is not always accurate. If you compare tick charts from different sources, it is easy to see that they differ.

Many data feeds have errors and don’t include all the ticks.

This could affect your results to a great extent. 

So, though tick chart trading is advantageous as compared to the line and candlestick charts, it should be used as a complementary strategy.

While you can always use tick charts to get desired results, traders generally blend them with time-based charts to get a complete picture of the market and enjoy the best of both worlds.

A common tactic is to spot support and resistance levels as well as trends on a time-based chart and plan entries with a tick chart.

You can identify volatility and avoid market noise by confirming market moves with traditional charts and taking signals from tick charts. 

Final Thoughts

Tick charts are simple, effective tools favoured by scalpers in an attempt to eliminate market noise.

The power of tick chart trading ultimately depends on individual preferences and tendencies. Some forex traders admit using tick scalping to make profitable entries.

However, as the charting space is not competitive, you should be able to use the trading method to approach the market from a unique angle to enjoy an edge.  

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