How is tick data used for Forex trading? What is a tick chart in the forex?
Definition: The bars on a tick chart are created based on a particular number of transactions. While time-based charts draw a new bar after a set period of time, tick charts display a certain number of trades (ticks) before printing a new bar.
A tick represents the difference between the current market price and the last-quoted market price that fluctuates in real-time, such as price change from 1.30612 to 1.30613. Tick charts are based on the smallest increment in forex.
The day traders who are trading in forex, shares, or futures are referring to charts for getting market-related information quickly so that they can make a decision quickly. These charts provide information on the prices, trading activity, and use different kinds of criteria like the time, volume, price range, or ticks. Many people who are not familiar with forex or another trading will ask what tick data is in forex. The tick-based charts show the changes in the currencies’ process after a specific number of trades or transactions called a tick,s are completed. A new chart is drawn after a specific period of time for time-based charts; the tick charts will be drawn after a specific number of trades or ticks are completed. For example, if the chart will draw a bar graph after 40 transactions are completed, it will be called the 40 tick chart.
Forex tick chart trading is extremely short time trading, and systems have huge noise and a lot of losing trades in a row.
Fx tick data are part of the MetaTrader program and very valuable for Expert advisors and indicators.
Tick charts Benefits
Since traders analyze the market before making a decision, the tick charts can help get better insights and additional valuable data when used alone or with the conventional time-based intraday charts. One of the valuable inputs which are provided is the relation between the trade volumes and prices. Since the ticks charts will be generated based on the number of trades, the charts depend largely on market activities, and they are generated more often when there are more trades. This makes it easier for the trader to notice the volatility and momentum in the market. During low activity periods like after hours or at noon, time-based charts will show a few bars, while the tick charts will be generated less often. However, the tick charts will still be useful for spotting trends, resistance, and support levels while trading. When the markets are volatile, the price fluctuation is indicated in a long candle in time-based charts. In contrast, the tick charts are more detailed since they provide information about direction, momentum, and any reversal. This information may be useful for traders who prefer forex scalping. More symmetry is also noticed for tick charts.
Tick charts Disadvantages
Forex traders should be aware that only some charting packages and brokers are providing tick data. Also, if the trader will compare the tick charts, he will often notice differences. Though the tick data is related to the number of completed trades, some of the reasons for the differences are data feeds, aggregation of transactions, differences in the calculation, or missing data.
Choosing the number of ticks for the chart
Traders can choose from any number of ticks depending on their personal trading preferences. Charts with ticks corresponding to Fibonacci numbers like 13, 21,34 are popular with some, while others choose 233, 133, or 33 ticks. Others may choose the number of ticks for their chart depending on their trading duration, like five minutes. This allows the user to notice the changes in market volume during slow or peak activity and take decisions accordingly. Some amount of experimentation may be required to determine the right tick chart for a trader.
Trading using tick charts
Forex traders have developed different types of trading strategies that are based on tick charts. Day traders may use 2000-tick charts, while those who prefer price scalping will use 70-tick charts for making quick decisions. Each trader will have to determine which kind of tick chart is most suitable based on his strategy
