Today is Sunday February 7th and as mentioned in yesterday’s post,  I will discuss the differences of time charts vs tick charts and a couple of other kinds of charts most people are not even aware of, volume charts and range charts.

Time charts are what most traders are used to using, although tick charts have gained in popularity in recent years. Day Traders mostly use time charts and I would have to say the 80-20 rule here would apply. I can’t back that up with any stats, but that is what I believe it is.

Recently back in October last year, the (CME) Chicago mercantile Exchange, changed the way that they report tick data. It has caused a lot of confusion for traders as many did not know of the change and just started seeing the bar activity increasing on the chart. Depending on the trading method that they use, it could have caused problems. It could be hard to identify what you are looking for with all the activity on the screen. I am sure it even caused many to go back to time based charts.

I noticed it right away and took action to recreate the data after a little research. What ever the tick count you used to use, you should multiple that by 2.3 times the original is our best estimate to get things back to what it was before the change. I realize that this is old news, but I have more to say on the matter, so hang in there.

The other difference is that when the volume really picks up, like on Friday, where we had around 4 million contracts traded, you have to do some adjusting. The charts will be moving a lot faster than you are used to and that is the main reason I am talking about the subject. In November and December, we were barely hitting 1.5 million contracts per day. Friday was the highest that I have seen in a long time. The reversal probably had something to do with it. So the point is, don’t be afraid to adjust your chart settings to compensate, but do it proportionately to any of the higher time frame charts that are using.

The benefits of using Tick charts still out weigh any negatives. Tick charts give you a much more detailed view of the days price action and allows you to narrow down your entry price much better.

Let me give two other kinds of day trading charts that have gotten much more popular recently. In fact, some think this is  the new thing, giving some the edge and that is the use of Range Charts and Volume charts. Some people do not know a thing about it and that is another reason for the post. I am still researching it for myself, but I looked at the two kinds of charts and I would have to say, I do like them. Volume charts are very similar to tick charts, but the bars are placed by volume, just like the description says.

In my brief analysis of the two, a 10,000 contract chart is equal to about 2100 tick chart, about 5 times greater. That would suggest that the average trade on the S&P eminis is 5 contracts per trade or tick. The contract chart is going to add up all the volume based on total contracts bought and sold and the tick charts are going to count the actual trades that have gone off and when 2100 is reached, it will post a bar. I have noticed slight differences, like more big volume from large institutional traders at certain area’s and less bars posted at reversal tops, suggesting that the small traders are getting sucked in before the reversal. It is not a very large difference, but I can see it. Prices are posted the same as far as that goes.

The last type of data  charts is called, Range Charts and this is what I hear is the next big thing. I did look at these, but I have yet to make a conclusion. The basic idea is, if you put as an input say 6 tick range on the S&P. A bar will post when the range is 6 ticks from high to low and not before. It does not matter how long it takes, but when that condition is met, a bar is posted. The movement is calculated and then plotted. Trade Station is what I use and they have this in their platform. I am not sure about other vendors, but if it interests you, I am sure you can find out.

Now you know the different types of charts that are available. . If their is interest, I can help those who have more questions in this area. I can help give you the corresponding tick chart settings to match the time charts you are using and if you have any other trading questions I would happy to answer them too, so please feel free to ask.

Below is a 500 tick chart of the S&P 500 eminis and a 1 minute chart.

Good Trading, Vince

Related posts:

1. DAY TRADING LESSON TODAY, understanding time/tick charts!
2. Tick Chart Trading the S&P Emini Futures
3. 44 to 1 Up-Volume to Down-Volume Day for Stock Market
4. The Trading Range is Set, Hold On
5. Trading Volume & Trading Volitility

Tags: 1 minute chart, 500 tick chart, 80-20 rule, range charts, reversal top, tick charts, volume chart