PaperTrader,
For a guy with 5 posts to his credit you sure ask excellent questions. Good work - this is exactly what I had in mind with thread.
My other resistance to pivots is that I like clean uncluttered charts. I'm not going to add a line to my chart (let alone six) if I can't explain why the hell it's there.
The bottom line is I can't give an informed assessment because I've never used them. Maybe somebody knowledgable on the subject can share their experience? Failing that I'm sure ET has a multitude of Pivot threads. In fact I am going to run a search after this - I might even learn something.
The TICK is essentially a count of the number of NYSE issues that are declining or falling at a given instant. From memory it is computed every six seconds (???) and is broadcast from 9:30-4:00. Much of the day you can ignore the TICK - it'll drive you nuts watching it bob up and down. You only want to pay attention when it reaches an extreme reading - I recommend you set alarms/alerts at your desired levels so that you have 1 less chart to watch.
When a TICK extreme is reached either one of two things has just happened,
1) buying or selling pressure has just climaxed and prices are at a short term extreme and therefore the chance of pullback is very high.
2) a large buy/sell program has just been triggered in the cash market. I showed an example in a chart in an earlier post.
In either case you want to fade the TICK. I do not advocate initiating a trade based on a TICK extreme but it may be an ideal time to take some profits, add to a position or simply liquidiate.
What are extreme readings I hear you ask? Well that depends. First thing to realise is that TICK readings are not symmetrical. If your buddy has a line on a TICK chart at +600, 0 and -600 then you're hangin out with a chump. The TICK has a posetive bias - ie: it's distribution has a right hand skew. Two reasons for this - 1) equity markets generally have a posetive bias, and 2) the uptick rule (is this still in effect - I'm not an equity guy?). I'm current using +1000 and -600, but I move them around as I see fit (especially in a down market versus an up market). Here's another gotcha, you're buddy with the TICK chart - if he's using a line chart then stop hangin out with him. You must use a bar/candle chart to pick up the extreme readings. I see this mistake all the time.
More experienced traders will glean alot from watching how prices react at TICK extremes. Eg: if a TICK reading of +1200 has failed to push prices higher you are dealing with a weak market.
I suggest you put a TICK chart on your workspace immediately and start watching it. You'll be amazed how useful it can be.
I'm just about ET'ed out for today. I'll check in again tomorrow.
For a guy with 5 posts to his credit you sure ask excellent questions. Good work - this is exactly what I had in mind with thread.
I knew this question would bite me at some point. Alot of people who's opinion I value, including floor traders, tell me that pivots do work. Fine, but can somebody please explain to me what the fundmental concept behind them is? Examining the formula does not provide a clue. This may well be case of a self-fulfillling prophecy. They work because everybody thinks they work and therefore they use them and therefore they work because every uses them - circular logic. Having said that, in this game if something works for you then be all means explot it for all it's worth.
My other resistance to pivots is that I like clean uncluttered charts. I'm not going to add a line to my chart (let alone six) if I can't explain why the hell it's there.
The bottom line is I can't give an informed assessment because I've never used them. Maybe somebody knowledgable on the subject can share their experience? Failing that I'm sure ET has a multitude of Pivot threads. In fact I am going to run a search after this - I might even learn something.
In a word VERY. There are lots of schools of thought on how to employ the TICK. Here's my rendition FWIW.
The TICK is essentially a count of the number of NYSE issues that are declining or falling at a given instant. From memory it is computed every six seconds (???) and is broadcast from 9:30-4:00. Much of the day you can ignore the TICK - it'll drive you nuts watching it bob up and down. You only want to pay attention when it reaches an extreme reading - I recommend you set alarms/alerts at your desired levels so that you have 1 less chart to watch.
When a TICK extreme is reached either one of two things has just happened,
1) buying or selling pressure has just climaxed and prices are at a short term extreme and therefore the chance of pullback is very high.
2) a large buy/sell program has just been triggered in the cash market. I showed an example in a chart in an earlier post.
In either case you want to fade the TICK. I do not advocate initiating a trade based on a TICK extreme but it may be an ideal time to take some profits, add to a position or simply liquidiate.
What are extreme readings I hear you ask? Well that depends. First thing to realise is that TICK readings are not symmetrical. If your buddy has a line on a TICK chart at +600, 0 and -600 then you're hangin out with a chump. The TICK has a posetive bias - ie: it's distribution has a right hand skew. Two reasons for this - 1) equity markets generally have a posetive bias, and 2) the uptick rule (is this still in effect - I'm not an equity guy?). I'm current using +1000 and -600, but I move them around as I see fit (especially in a down market versus an up market). Here's another gotcha, you're buddy with the TICK chart - if he's using a line chart then stop hangin out with him. You must use a bar/candle chart to pick up the extreme readings. I see this mistake all the time.
More experienced traders will glean alot from watching how prices react at TICK extremes. Eg: if a TICK reading of +1200 has failed to push prices higher you are dealing with a weak market.
I suggest you put a TICK chart on your workspace immediately and start watching it. You'll be amazed how useful it can be.
I'm just about ET'ed out for today. I'll check in again tomorrow.
