Each day, buyers and sellers go to battle.
If you get on the wrong side of the fight—you’re destined to lose money.
That’s why I make it a daily practice to study tick charts.
Not only does it show me where the buyers and sellers are…
But it also gives me a real-time picture of market health—an essential tool for day traders.
In fact, I applied it the other day for a quick scalp in the Russell.
However, to the naked eye, the tick chart can look like an abstract painting.
If you don’t know its nuances then you won’t be able to maximize its power.
That’s why I’ve outlined my best practices for implementing tick charts—which I’m going to share with you today.
Most people aren’t too familiar with this measure, so let me explain. The Tick chart tells me whether there is buying or selling at the New York Stock Exchange (NYSE).
There are approximately 2,800 stocks that trade on the NYSE. The Tick chart gives each stock an uptick, downtick, or nothing based on the last trade. When a stock trades higher than the previous order, it’s called an uptick. If the stock trades lower than the previous order, it’s called a downtick.
When you go to look up the Tick chart, you’ll generally find it under the symbol TICK. Depending on your platform, this may require a ‘/’ beforehand or a ‘$.’ You will need to discuss with your individual broker to determine the ones they use.
As I mentioned previously, the Tick chart measures upticks vs. downticks. When a stock trades at the same price as the last trade, it gets nothing. That’s why the chart rarely has a lot of extremes.
Now, for obvious reasons, the Tick chart is bound by the total number of stocks on the exchange. Combine that with normal stock flows, and you find that the Tick chart is mean-reverting. That means it always tends to come back to the center from extremes.
You can see what I mean in the chart below.
TICK Daily Chart
The highest the Tick chart ever got was 1667, and the lowest -1556. If you did an average, it would land somewhere near the middle. That’s why I use the chart to gauge market health on a relative basis.
There are a few levels that I want you to take note of +/-600, +/-800, and +/-1000. These create the normal extreme levels for the Tick chart that you want to look at.
Now, here’s the trick to using them – you want to move in the opposite direction of the extremes. So, if the Tick chart hits -800, you want to go long equities. If it hits plus 800, you want to be short.
You’re probably thinking – why would I want to do the opposite?
Well, when you break it down to intraday time frames like the 5-minute through 15-minute charts, you’re looking to trade with the flows. So, when it hits extremes, it tends to move in the other direction. Ideally, you want to see it hit -800, reverse, and head higher. This corresponds typically with a bullish move in equities.
Here’s what it might look like intraday on a 5-minute chart.
TICK vs. SPY 5-Minute Chart
The TICK is the more transparent set of lines on the chart. First, you’ll notice the rectangle outline that shows the SPY candle making a massive dip. At the same time, the Tick chart dipped all the way down to -1,000. That’s a signal that it’s at least reversing for a quick scalp.
Next, you see how the Tick chart started hitting the -1,000 level again as the SPY began to bottom. When the Tick chart rallied, it went all the way back up to +600, which was coincidentally the top in this move.
You can test this out yourself. It’s really fascinating to see how it plays out time and again.
The Tick chart itself won’t make you a better trader. It must be used in conjunction with your typical strategy. All it does is improve your accuracy of entry timing. If you try to use it without your bread-and-butter setup, you’ll quickly drain your account.
Most importantly, you need a strategy that works with intraday trading. The Tick chart won’t do much for you for swing trades. It mainly works for short-term timeframes intraday… generally between 5-15 minutes. Once you go out further, it tells you something entirely different.
It took me several years to discover how to create my TPS strategy and incorporate these measures. You can learn all about it in my upcoming free webinar. I explain how I spent 8 years learning to trade, finally turning my $38,000 account into over $2,000,000 in the last two years.
I don’t know about you, but I am pumped for earning season.
It’s when companies tell Wall Street how they’re doing— and given their unpredictable nature—it should create some much-needed volatility and a slew of trading opportunities.
This week’s top trade ideas are ripe for the taking.
But a word of caution—stay nimble and focus on risk management.
Let’s get started!
This was a chart that I had been watching alongside Weekly Money Multiplier Members this week that I finally got my fill.
Here’s the chart I put out to members explaining the trade setup.
ETR Daily Chart
This chart follows my classic TPS setup. As a refresher, the TPS setup contains three components:
I would say that 90% of my setups are TPS. Over the years I honed this strategy, and it works for me in any market. However, I’ve learned to make some adaptations as needed.
In today’s market, I want to be a little more conservative at times. That means I usually wait for a lower entry than normal to limit my risk on the trade. Plus, I can always scale out earlier for partial profits.
ETR should play out by exceeding the recent highs. However, this could take several weeks, so it requires some patience. I am currently playing this through call options.
Healthcare stocks didn’t perform well last year. Recently, they’ve recently shown a lot of strength.
As usual, I’m approaching this trade with my TPS setup. However, I’m making some adjustments here.
Let’s start by taking a look at the chart.
BSX 78-Minute Chart
First, you’re probably asking why I used a 78-minute chart. Well, there are 390 minutes in a trading day. Divide 78 into 390 and see what you get…
Now, the dots at the bottom show green, which means I don’t have a squeeze yet. However, it will probably be only a few more days before one occurs. With a nice pattern formed already, and an obvious uptrend, this represents some sweet TPS potential.
What’s neat is you can see how the last TPS squeeze played out. When the dots turned from red to green, the stock fired off higher. I expect this to happen again, and hopefully push past the all-time highs.
Would you be surprised if I told you my last pick was another TPS setup?
This last trade might be a little trickier than the last two. Let me explain why. I want to start with the 130-minute chart.
PPL 130-Minute Chart
Again, if you’re like ‘why 130-minutes’ – divide 390 by 130…
Now, this chart has the right trend and consolidation pattern as well as a squeeze. However, you can see that we’ve had mini squeezes that fired before this that didn’t really do much. The last squeeze that really did anything notable was almost a month ago.
However, I can mitigate my risk here. When a pattern is broken the trade is over. So, the lower orange trendline is right near the purple line which is formed by the Bollinger Band. Notice how price generally sits within the Bollinger Band going all the way back. It only tends to pop out of it when it’s starting a bigger move.
So, I can enter the trade closer to the purple Bollinger Band to limit my risk on the trade. Then, if it pops up to the upper end, I can at least take a portion off and lock in some profit on the trade.
This is why I always advocate for scaling in and out of a trade.
It wasn’t overnight, that I can tell you. Learning and creating a style that is your own takes time, practice, and patience. You need to journal your trades and pay attention to how they perform in different environments.
If you want to learn more, I have a presentation coming up… it’s free to register… and well worth your time.
You’ll learn exactly how I went through the journey that took me from $38,000 to over $2,000,000 in two years.
This market is driving me bananas!
And as a trader, the best thing you can be—IS HONEST WITH YOURSELF.
My bread and butter TPS setups on the daily time-frames aren’t giving me the number of wins I’d like to see.
It’s something that I encountered before. That’s why I’m not scrambling to learn a new strategy and dump the one that’s changed my family’s life forever.
However, that doesn’t mean I’m not looking to make adjustments—because I am.
If you can’t identify what’s a bad trade and what’s a garbage strategy, you’ll end up chasing the last winner over and over until you’re broke.
Let me explain how to separate the two.
Regardless of your experience, you need to start recording…
Make your trade journal your best friend!
Your journal contains everything you need not just to separate failing strategies from failing trades— but strategies that make you money.
Most traders fall into two categories: Babe Ruths and base hitters. Babe Ruths swing for the fences every time. The Babe struck out a ton. But, he also hit a lot of home runs. What made him valuable was that his big hits outweighed his losers.
Traders with this style tend to have low win-rates. They aren’t necessarily speculative bettors. The key for them is that their wins outweigh their losses. This strategy requires a bankroll large enough to the trade size that allows you to execute enough trades that the averages play out over time.
Base hitters work by making consistent trades. They rely on a narrow risk-reward ratio and focus on kicking up their win-rate. Traders like this will often use mean-reversion trades or other high probability strategies.
Our emotions will push us to become Babe Ruth’s. It satisfies the guilty urge we have to make a lot of money very quickly.
The problem is that strategy is extremely tough to work with when you’re starting out. It requires a lot of trades in a lot of market conditions to collect enough data to determine whether the strategy works out over the long-haul. Unless you’re fine being in a demo account for a year or more, it’s a tough pill to swallow.
This is what your equity curve might look like under this strategy:
Babe Ruth Equity Curve
Working on your win-rate will get you into the game faster and make it easier to determine whether the trade or strategy is failing. Base hitters should see a consistent equity curve heading up and to the right as each trade is executed, akin to something like this:
Consistent Win-Rate Equity Curve
If you haven’t done it before, watch the market during the first 30 minutes of the trading day. The first 15 minutes are especially crazy. Market volume dries up a lot right before holidays. Stocks have their heaviest volume during earnings.
Each market and stock has its nuances. The question is whether these different influences actually matter to you.
The quick fix is categorizing your type of trading. If you do scalps, seasonal influences won’t matter, but the time of day will. Swing traders need to be aware of the broader market as well as earnings in similar stocks.
For example, earnings results in one semiconductor name could impact all the other semiconductors.
Categorizing your trades is only the first step. The second is to label the influences. That lets you separate the ones that matter from those that don’t. You might even be surprised to find a few that you don’t commonly look at matter quite a bit. Search around and make a list first before evaluating whether they’re important.
Everyone goes through a lull in their trading. Unless you have multiple strategies that you trade at the same time (which I do not recommend until you’ve got your first one set and profitable), you’ll come to a point where you can’t seem to find any trades.
This comes from three problems: you’ve gotten complacent, your strategy only works under certain market conditions, or your strategy is bunk.
The first one is easily correctable. The second is easy to identify. The third takes a little analysis.
Being complacent happens to all of us. The best traders actively look for it. Most rely on evidence that proves to yourself you missed trades.
That’s where your trade journal and historical charts come in. One part of journaling is noting what setups you pass on. It doesn’t have to be as detailed as your actual trades, just something that lets you know where to look back.
Additionally, you want to go back through stocks within your typical trade parameters that you haven’t scoped out. Look at their charts and see if you missed any setups.
The idea here is to either prove to yourself that you did your due diligence or you didn’t do enough. Most of the time, you’ll find you just missed setups. Remember, looking for setups takes practice too.
Now, let’s say you didn’t miss any setups. You’re faced with figuring out whether your strategy got lucky or only worked in certain market conditions. There are two ways to see which is right.
First, review your trade journal. See whether the trades you took are all under the same or different market conditions. The second is to go back through a period in the market that you know has different conditions and try to find setups.
Both of these will be able to show you whether your strategy works in different environments. Keep in mind, there is nothing wrong with a strategy that works only in one environment. It just requires more patience.
Once you find your strategy, you don’t want to make massive overhauls. Tiny tweaks work just fine. If you find your strategy works and only gives you limited trades, feel free to start another one.
A lot of the time it helps people to understand how I developed my TPS Strategy. I have a webinar that explains how I first started and then narrowed down my focus.