Disorder Becomes Order

I choose my tick charts for each trading instrument based upon how the chart looks and the amount of open interest on that contract. The greater the open interest on that contract, the greater the number of ticks needed to give my charts the orderly appearance necessary for me to trade them.

For the S&P 500 Futures

Relative disorder at 50 ticks
Appears much more orderly at 150 ticks

In the 50 tick chart, the price movements appear much more erratic, disorganized, and are much more difficult to trade. However, when I change to the 150 tick chart, price movements appear much more orderly, clean, and with fewer doji candles and shorter wicks. When one trading instrument becomes disorderly and erratic on various tick charts and time intervals, I look for another trading instrument. Today, with corn charts looking somewhat erratic and both soybean and wheat prices at lock limit, I have been looking for another trading instrument. The S&P 500 index futures would fit this bill today, based upon the 2nd chart in this posting.

Order In the Charts!

I have found that in general, the higher the time frame one looks at the charts, the more orderly they become. Most charts appear much more orderly on the daily chart than on the 15 minute or 5 minute charts. The higher time frames appear with less market noise and have a more clean appearance. However, most traders don't have the stomach to trade the daily charts because their account sizes are insufficient to weather the storms of market noise that occur.

If I can't find a chart that looks orderly to trade, I look for another instrument to trade. It is a waste of money to attempt to trade charts that don't have an orderly appearance. I may as well go flush my money down the toilet rather than attempt to trade charts that don't show order.

Often, a chart that appears orderly today will not be orderly tomorrow. In fact, even the intra-day charts will show great order during one hour and great disorder in another hour of the same day. Grains tend to appear most orderly for the first and last hours of the day session, and become more erratic in the mid session time periods.

Different Ticks at Different Tocks

At different hours of the day, a different tick value may be necessary to achieve the orderly appearance that I need to trade effectively. For example, during evening trading, I will set my corn charts to a tick value of 30 ticks. During daytime session trading when most of the volume occurs, I will change to a 50 tick value. I also lower my tick values when I trade the 10-year US Treasury futures during evening trading. I will often do the same in trading currency futures.