Use Tick Bars to Gain a New Perspective on the Markets

When first learning how to dissect the intricacies of the markets, intraday traders typically focus on time based candlestick charts. The reliability and intuitive nature of time based charts offer remarkable information to help determine general market direction, prevailing trends, possible future market movements and provide the foundation for basic technical analysis.

Traders tend to find comfort in the fact that a new bar will form, regardless of market activity, once the user defined time period has been met. While the reassuring nature of time charts can add a layer of confidence, there are alternatives to display market data and NinjaTrader offers a number of bar types to fit the unique needs of varying trading styles.

One bar type, where time is irrelevant, is a tick bar. Rather than new bars forming after a specified time, a new tick bar will form once a user defined number of transactions has been met. A transaction can be for one contract or numerous contracts (aka block trades); however, each transaction, regardless of size, holds the same value. While tick bar intervals are 100% customizable, popular intervals emulate numbers within the Fibonacci Sequence such as 144, 512 and 610.

Savvy tick bar traders can use this information to gain additional insight on momentum, trend strength and overall market volatility. The above chart displays the E-Mini S&P (ES) with a 610 tick bar. Note the X-axis time intervals are not in unison as new bars will only print once the 610-transaction threshold has been achieved. A volume indicator is featured as second panel, which are commonly used with tick bars as they can offer valuable information about contract size for each transaction. Additionally, NinjaTrader’s Tick Counter indicator was added to the chart which displays the number of ticks remaining in the current bar.

Download NinjaTrader today and explore the various Bar Types that fit your unique style of trading!