How To Use The NYSE TICK To Trade The E-Mini
While there are many different strategies to trade
the E-mini with — among them href=”https://www.donmillerqqq.com/index.cfm/emini/?src=modules”>Don Miller’s
— one that catches reversals fairly well involves using the TICK. The NYSE TICK
is the difference between the number of issues trading on an uptick and the
number of issues trading on a downtick. Let’s say there are 3000 stocks trading
on the New York Stock Exchange, and of these 3000 stocks, 1800 are trading up
from the previous price (an uptick) and 1200 stocks are trading down from the
previous price (a downtick). This is the calculation:
The resulting TICK in this case is +600.
Conversely, if there are 1100 stocks upticking and
1,900 stocks downticking, the TICK is negative:
When the TICK reaches an extreme, it becomes
unsustainable, and the market is due for a reversal. Plus or minus one-thousand
(+/-1000) is generally considered to be extreme. TICKs in the +/-1200 area are
very extreme and usually indicate a reversal is very close. In rare cases, these
extreme levels may be maintained over several bars, which usually results in
many traders being faked out.
Another way to use the TICK is by looking
for divergence — when the market is making a high (or low) but the TICK is
not making a high (or low).
Let’s look at a few examples:
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A lot of traders like the first hour.
And with good reason — there usually are some good opportunities at this time.
In particular, there’s the “10:00 reversal.” While a reversal does not occur
precisely at 10:00 AM every day, there is a tendency for the 9:45 AM – 10:00 AM
to produce a decent contra move.
You first clue is the TICKs. In this
case, +1000 tells you to be prepared for a reversal. The double (or “tweezers”)
top that sets up is an excellent signal to short for a nice trade.
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While the middle of the day is typically the worst
time to trade, after lunch the volume picks up and trends return for the
afternoon. After 2:00 PM is a good time to start looking. In this next example,
we see TICK divergence followed by a nice move down.
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Here’s another morning example. When the time of day
is combined with href=”https://tradingmarkets.com.site/stocks/education/strategies/01042000-3274.cfm”>Kevin
Haggerty’s volatility bands, it can be powerful. In this case we have the
“10 AM reversal” happening near a volatility band. Note the TICK
divergence.
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This last example is the most aggressive, but can
yield excellent results with proper money management. In this case, the TICK is
in overbought territory. The futures move up, while on the same bar, the TICK
falls. A short below the low of the high bar made for an excellent
trade.
Please note that although the examples given are all
on the short side, this technique works just as well on the long side. For more
information on trading the first hour, see href=”https://www.tradersgalleria.com/galleria.site/courses/main/?int=index_page&full=1&id=6014&fwww=1″>Kevin
Haggerty’s First Hour Reversals Module.
href=”mailto:bricew@tradingmarkets.com”>Brice Wightman