I just started trading forex, but i have been trading other vehicles for a while now. I was curious if any of you guys use tick charts over time charts, and if so how many ticks you usually use. I am using 512 at the moment but i seem to betting a few more false signals than when trading futures. Also, if any of you use stops to enter trades in the direction of the trend, how far above or below the signal bar will you set the stop? I was thinking 1 or 2 pips, and at this time i have really only used 1 pip stops so far, but it seems like i am getting early entries before the trade goes in my direction.
Hey guys what do you think, can we predict volatility by using tick data? For example if three 1M candles have increased tick volume, it reasonable to think that it signals the start of volatility? Trying to download data from my Hotforex platform and statistically test some tick patterns on majors like EUR/USD, USD/JPY. Maybe anybody has already carried out such tests??
I'm not sure if you can because even though the tick chart represents a certain number of trades it doesn't share the volume traded at that price. BTW I'm on thinkorswim, every platform is probably a little different.
Often I am use timeframe from weekly and daily also hourly timeframe then go to 15 timeframe, and out stop loss on area support and resistance based on anaysis, certain trader might use stop loss taking profit with ratio 1:1 which if they put stop loss 10 pips also has target 10 pips too
I don't determine where to set stops according to the end of a signal-bar: I use a combination of volatility and the position of the last swing-low/high. I understand the method you're using (though I no longer use it myself) and would suggest one pip plus the full spread (so on the EUR/USD during its RTH, for example, that will normally be 2 pips, while on some other less widely traded pairs it will doubtless be a little more). I find volume charts far, far more useful and helpful than tick charts, and for that reason I think forex futures are, overall, a much better, more reliable and safer bet than spot forex. "512" is a funny number: no criticism implied at all, but I can't help wondering how you alighted on a "power-of-two" number rather than a "rounder" number (like 500, for instance)? I'm sure the difference is inconsequential, anyway - I'm just curious!
Thanks for the insight on using volatility, I will look into that. Yes I agree 512 is a funny number. I was just using it for a quick trial, but it's actually one of the default tick chart settings on Thinkorswim. I'm not sure about the reasoning behind it myself. Anyway, since posting this I realized that i was trading in too short a time frame and have since switched to 15m. The short time frame gave me a lot of bad entrys because the stop was so easy to hit from noise alone. At least with this longer time frame the market will actually have to be moving in my direction a little bit more.
Tick charts are most commonly used for scalping. Apart from that I would recommend you to follow 15 minute charts in case of day trading. And yes Stops are very important for forex market, like, in some currencies for example: EURGBP, GBPJPY are very much volatile, on account of some event they easily move 6-7 pips so better to get hit by margin call, I would recommend to go for stop loss as you will get more opportunities ahead to make money. To place stop loss take help from indicators that suggest good support and resistance, like Fibonacci. Also you can use different methods to determine where to place stop loss like percentage method, support method, moving average method. Percentage method: In this method you must decide the %of risk you are ready to bear and set a stop loss at the point where the value is (%of risk x market price of share). Support method: this method can be used if you are able to find the recent support level of the stock. You need to set the stop loss just below the recent level of support to provide it some room to trade before pulling the trigger. Moving Average method: in this method a moving average can be applied to the stock chart and stop loss can be placed just below the moving average, reason being same to provide some time for stock to trade before exiting the trade.
I think rarely as scalping trader they trade on pair that has high spread, gbpjpy eurgbp and so on that usually spread range between six or seven pips, while as scalping usually they having small target profit and this need movement to cover spread first before on profit