Does anyone know the benefits / pit falls of using ticks (ex. 50 tick chart) versus a 2 or 3 min chart for intraday breakout or fade plays?
(1) Obviously, tick charts generate more data, especially during a "fast market" condition. (2) Start with a longer time horizon and then consider shrinking it down to something you feel comfortable with, not the other way around. (3) Shorter-term trading requires making more decisions, each of which has stress associated with it, which can have the potential to exhaust you and compel you to make impulsive trades.
When you get to intermediate level trading and are able to use a screen display for trading, there is a combination of display elements that makes carving off ends of market moves fairly straight forward. What you are concerned with mostly is what I call min max timing. For people who are trading to take everthing out of the market that is offered, they are usually paying most attention to whether they are a tad too early or too late on their reversals. I am speaking of 30 second periods which appear on a screen as about three inches of tick movement laterally and he tick chart streams across the screen location form right to left. It is used in conjuncyion with the walls that are showing on the DOM, two T&S charts (one for everything and one for 50 contracts and above) and a leading 2 minute bar chart of the five minute chart of the instument you trade. You know by the channels where the tick chart is going to reverse. You see the streaming ticks progression come in and land on troughs and climb to peaking altitude on the price topping out effects. Today for example the first ten or so bars on ES were yeilding trade of five to seven points each five minute interval and the YM tick chart was doing about 50 point swing as prescribed on the YM 2 minute chart. These rates are around a point a minute profit on the ES and 10 points a minute on the YM. This means that for the first ten bars or so of the ES, those 50 minutes got you about 50 points on ES and about 500 points on the YM. Let me try to explain what a tick chart is in my lingo. I look at every tick traded through the day for YM and ES. My tick charts are segmented into 2 minutes divisions vertically for YM and 5 minute vertical divisions for ES. I have a clock that restarts at the begining of each residence period for each tick. A tick is a vertical bar that has the bid on the Bottom and the ask on the top. Thus, it is a 1 tick range tick chart. For making money a person carves the turns of price as one profit segment ends and another begins. You can see the the first ten bars of the 5 min ES chart today were giving me turns about every few minutes and they were about 5 points apart on average. Later in the afternoon in two 5 min bars the turns were running 5 points up 2 points down 3 points up , one down, two up one down and one plus up and one down and one plus up over this ten minute period. The full range was 7 points and many more points than that were taken. I described about 60 minutes in two paragraphs for today. The haul per contract was over 60 points. you always know the end of each run that is coming up and you just rhythmically go through taking up the collection reversing where reversing is about a 30 second duration period wherein you click once in the 30 seconds. At this type market activity level you can see on the 50 contract and up T&S that you are a miniscule player in the infinite scheme of things. you can debrief at the end of the day by running your fingerup the print as you slip the YM tick chart from right to left for all the tick movements during the day. you can see how you were running e=arly or late during the day when these brisk periods occur. Most of the time it is slow mo tion and you need not be looking much further than the LTL and RTL channel lines and the walls on the DOM. Tuesday was a neat day too on tick charts because the markets did not have much showing on the DOM to stop the price movement but occationally. The points per minute were running well over the above description when the traverses on the trend started ripping. fewer clciks were involved as profit segment were approaching 10 or more ES points each in single five minute bars. By using this approach you can get a couple months normal trader returns per hour of high velocity trading. I would let yourself at least watch it happen as a way to get acquainted with seeing the market for the first time. Most people have never seen the market and they go broke before they ever do.