Using Tick Charts and Oscillators for Day-Trading

by

By Ilan Levy-Mayer VP of Cannon Trading Company, Inc.

I really don't think anyone has found a "perfect way" to day-trade.

Different techniques work well in different market environment.

In this week short educational feature, I will touch about one technique one can add to their trading arsenal. This technique works better on choppy, two sided ways. It DOES NOT work well when the market has a strong trend.

A few principals I like:

  1. It uses a tick chart rather than a time chart. I like tick charts better when day- trading shorter time frames for the simple reason it already includes a big factor in the market, VOLUME. If you are using 5 minutes chart for example, you may get signals simply because time "has passed" and certain indicators you are using adopt certain values. When using tick charts, at times where there is lots of movement in the market, you won't have to wait until your time frame bar closes to get your signal, volume becomes a bigger more important part of your trading decision.
  2. To continue reading this short article as well as viewing the illustrative chart, please fill out the short form below.......
  3. The chart below uses a simple RSI indicator. I coded the chart to display red bar color when the RSI gets above a certain level (which is overbought) and coded the chart to display the color green when the RSI drops to a certain level which is oversold.

About tick charts:

Tick bars are built based on volume - tick or actual volume when available. Time is not a factor. Each bar in a Constant Volume Bar chart contains a specified volume level. This volume level is reached by accumulating the volume of each of the underlying bars. When the volume level is reached, the next Constant Volume Bar begins to accumulate volume from the underlying bars. For intraday charts, tick volume is used to determine the Constant Volume Bars.

About RSI: Relative Strength Index (RSI)

Introduction

Developed by J. Welles Wilder and introduced in his 1978 book, New Concepts in Technical Trading Systems, the Relative Strength Index (RSI) is an extremely useful and popular momentum oscillator. The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. It takes a single parameter, the number of time periods to use in the calculation. In his book, Wilder recommends using 14 periods.

DISCLAIMER:

Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits.. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. Readers are urged to exercise their own judgment in trading!

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About the Author

Cannon Trading Company, Inc.(members of the NFA, CFTC and BBB)A Full-Service Online Futures and Commodity Trading Brokerage Firm incorporated in Beverly Hills since 1988,and we take great pride in the service we provide to our clients.

Cannon Trading offers a variety of trading platforms, and can help you find the one that's appropriate for your individual trading style. In addition, we offer some of the most competitive rates in the industry.

At some other brokerages, a trader may have to speak with an unlicensed professional - or even a telemarketer - before reaching someone who understands trading. Those minutes cost money! At Cannon Trading Company, we always respect our clients. Every call is answered by a licensed broker. We do our best to help traders achieve their goals, educate themselves about the markets, and create successful trading strategies. Our worldwide client base speaks for itself!

Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in the light of your your financial condition.

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