What
is the premise of the tick volume report?
On the most basic level, supply and demand is what
drives prices in any market. This is one of the major
reasons why volume analysis is so important to traders.
There are four common ways to use volume for trading;
which are to determine the validity of a breakout move,
whether a retracement is an actual reversal or simply a
retracement of a trend and where key support and
resistance levels could be placed. With the tick volume
report, what we are looking at is volume as a gauge of
support and resistance levels. When an area has a
significant amount of tick activity, meaning that prices
hit that level on multiple occasions, it becomes a
battle zone. If the battle zone is broken on the
topside, it becomes support. If the battle zone is
broken on the downside, it becomes resistance. This is
what you have to keep in mind when going through our
weekly tick report, that a high level of tick activity
represents a key support or resistance level.
How is this different from the Regular Volume
Indicator?
The difference between the Tick Volume report and the
Regular Volume indicator is that tick data represents
how many times prices have touched a specific level. The
ticks may or may not be dealt prices since they are
based off of an accumulation of ticks at the specific
price level over the course of a week. Therefore we use
it more as a gauge for support and resistance, because
if a price comes back to a specific level on multiple
occasions, then there is a high likelihood that the
level represents a significant point of battle. The
Regular Volume Indicator however is all based upon dealt
transactions and is used as a gauge of demand at the
moment and its relationship to the current price move.
How can I use this?
Using the tick volume report is far easier than the
regular volume indicator since we simply look for high
concentration of tick levels. For example, take a look
at the 2 charts below. The top is a price chart, the
bottom is a tick chart for the week of 1/30/06-2/03/06.
The tick chart shows that 118.30-118.65, 117.50-117.80
and 117.15-117.45 are all zones that had a large amount
of ticks. With the first price chart indicating a
current price of 118.60, we see the nearest support
zones as 118.30-65 and then 117.50-80.
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