fyi, if you buy 200 contracts at market, depending on what's on offer in the market, it may turn to be: 1 tick --> e.g. 200 ES @ 1130 2 ticks --> e.g. 100 ES @ 1130, 100 ES @ 1130.25 and so on. depends on the offer. it can be 200 ticks if you buy the 200 contracts independently yes.
I agree that neither chart shows that. My concern is that more tick bars will be generated when the small players are hitting the bids and offers and not the large players but you don't know who is responsible for generating the tick bars. Here is my concern in an extreme example: 2000 single contract trades are executed generating 2000 ticks. On a 100 tick chart this generates 20 bars. On a 1000 volume chart this generates 2 bars. Now you run a 14 period RSI against the closing price of each bar on those 2 charts and you get a very different picture and reading. This is an extreme example and doesn't happen often but the volume is what picks off all the bids and offers and moves the price to the next level and not the number of times a trade was executed.
Yes, but in your example, IF the trades cause the price to move, you will "see" the price movement faster on the tick chart since more bars will have closed vs. the volume chart which might include the entire price movement in one bar - instead of across a number of bars - thus your indicator would be "slow".
True but it's unlikely that you would use values for a volume bar that didn't indicate this. So in a heavily traded liquid market such as the ES the tick chart would generate an unnecessarily large number of bars in this example.
I don't know that though - again, like you stated above - it depends on how many trades caused the movement. For me, it's like comparing apples to oranges. A lot of ticks (trades) might be either a little volume (small contracts per trade) or a lot of volume (large contracts per trade). A lot of volume might be either few ticks (large contracts per trade) or many ticks (small contracts per trade). Given that, it seems to me it is really not possible to say that one type of chart shows more than the other - because you never know what "type" of trading is happening (small contracts per trade or large contracts per trade). IMO, if you are using indicators based on the close of a bar, you want a type of chart that shows price movement the fastest - something like Ensign's new "range bar" - where bars close based on price range and not on time, ticks or volume - for example, a bar is closed and a new on created when the price moves by X points.
I've never heard of that method for constructing candles. Thanks for enlightening me there. Can you actually create candle charts with this? I assume that the close of the candle will always be at either the high or low? Is this correct? So there are only 3 values in each in each candle: the open, high and low? The close will be either the high or low right? Guy
Check out this link for a discussion: http://www.ensignsoftware.com/tips/tradingtips49.htm Scroll down to the section on "Momentum Bars". There is a comparison of charts of time, ticks, volume and momentum (range).
From all of the posts so far I would have to say that, Guy, you should not use tick charts. You are correct. Your statements highly favor trading using volume information. So stick with vehicles that use volume information. As everyone knows, there are many ways to make $ in the market. What works for one person may not work for the next. I have had a trader actually get angry when I tell them that you don't need volume to trade profitably.
Great link - many thanks. For others reading this thread here is a summary of momentum/range bars from that link: Momentum Bar charts have the following characteristics: Each bar is the same height because the range is constant. The close of a bar is always at the high or low of the bar. The open of a bar is always one tick below or above the close of the preceding bar. The time period covered by each bar varies. All gaps are filled with inserted 'phantom' bars.
This is actually an exercise to attempt to discover if the tick chart has an advantage over the volume chart and if so under what circumstances. I'm not trying to justify my use of one over the other but rather play devil's advocate with the comments. I value and respect all the comments that have been made to this thread and thank everyone for their participation.