Great Grains! A Tick in Time Saves Money!

Good volatility in grains in the opening minutes of trading today makes for healthy profits for traders. Volatility provides for profitable trading. These are superb conditions for profitable trading! However, it wouldn't be possible for me if I was using only the traditional time-based interval charts. Today's trading helps to make this point very well!

Contract-Based vs. Tick -Based Charts

As I have mentioned in previous postings in this blog, I trade primarily using tick charts, which are drawn by counting orders moving through the exchange system, rather than based upon time intervals, as most traders do.

There is also a third alternative -- volume-based charts. Volume charts don't count orders, but rather, the volume of contracts themselves that are being processed through the system. They tend to have an appearance similar to the tick charts. Volume chart candles are based upon the number of contracts being bought and sold, whereas tick charts count the orders being processed. There is very little difference in these two charts, and if I fine-tuned the volume chart on the left just slightly, the difference might very well disappear and slide into meaningless oblivion.

Time Interval Charts vs. Tick Charts

In my triptych, I use time intervals as well, but my trading is done primarily on tick charts. Perhaps it would be more accurate to say that I use both time interval charts and tick charts. If I was forced to choose one or the other, however, I would choose the tick charts because they are immediately responsive and sensitive to the markets, and instantly respond to subtle changes in market sentiments.

The chart shown at right shows a 3 minute time interval chart on the left, and a 30 tick chart on the right. Clearly, the tick chart shows much greater clarity when the shift in sentiment occurred, and allowed me enter and exit the market with much greater accuracy in my timing, and thus, better execution of my trading strategy.

The tick chart permitted me to place two trades -- one quick short trade at market open (just 2 minutes in length), and a much longer long (and even more profitable) trade a few minutes later -- whereas the time interval chart on the left would have only permitted me to place one long trade. If I had traded using only the 3 minute chart on the left, I might have lost money by going short and holding my position too long, and I would have certainly entered my long trade much too late.

Using the tick chart on the right, I was able to exit my short trade at the bottom of the trough as shown (note that, as usual, the Klinger Volume indicator gave me advance notice of the change), and prepare to go long only seconds later. This change in market sentiment occurred literally within a one-minute time period. This increased my profits and gave me the opportunity to respond to almost instantaneous shifts in market sentiment from bearish to bullish! Only the tick chart permits me to accomplish this!