Minute Chart versus a Tick Chart

31. May 2009
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I wanted to give a quick example of why I use tick charts as my primary chart over a chart that uses time.

Friday had a wild close and seemed to really exemplify why I rely heavily on tick charts.  Below is a 5-minute chart which shows the huge run up and then some chop into the close (circled area). 

 
 
Below is a 987T chart of the same data as above, which shows the run up and the movement into the close.  This means every bar contains 987 trades.  Thus, higher volume will cause the bars to form quicker.  On the flip side, low volume will take much more time to form.  Using a tick chart instead of a time-based chart allows you to more clearly see the structure of movement.  I am a firm believer in fibonacci ratios and series, so I use various tick charts from the fibonacci series, in this case 987.  To see larger moves, I like the 1598T charts.
 
 
Another great example is overnight trading, where volume is light and it takes a lot of time to see a move unfold.  If you remove time from the equation, the movement is much simplier to see.  In the example below, the light blue area is the overnight trading.  The waves move seamlessly from the overnight trading into the normal trading hours. See next chart for this same data in a 15min chart.
 
 
Below is a 15-min chart of the same data.  You can see the overnight data is very stretched out compared to normal trading hours.  This makes it difficult to see the structure of the waves and movement as opposed to the chart above. 
 
 
This doesn't mean I don't use minute-based charts as well.  When trying to see the larger picture of what the market is doing, 15 minute charts, 240 minute charts, daily charts, weekly charts, etc are also extremely valuable.
 
 
 
 
 
 

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