What Are Tick Candles?
Introduction
Tick candles are a new type of candle based on transaction quantity. They can be easier to analyze and the fresh perspective they provide can allow traders to increase gains.
Formation
Tick candles close after a quantity of trades take place. For example, 1000 tick candles close after 1000 individual trades execute, regardless of how long it takes, or how large the trades are.
Comparison to Time Candles
Advantages
Less Market Noise
The biggest problem with time candles is that some candles have more information than others. One hour of trading activity will always be condensed to one candle with hourly candles, so an hour of limited trading activity will occupy the same space on a chart as an hour with high trading activity. If traders act on candles based on low trading activity, it’s easier for the market to move against them.
Tick candles solve this because each candle consolidates the same quantity of trades. Therefore, traders who use tick charts can be more confident that the candles they see contain a similar amount of trading information, allowing a greater amount of their trades to be successful.
Clear Market Movement
Another advantage is clarity. Time candles can be challenging to trade because the patterns aren’t always clear. Tick charts tend to provide more patterns and clearer trends that can be acted upon.
Better Entries & Exits
Another perk of tick charts is better entries and exits. This is a byproduct of a clearer chart. Stop losses can be placed closer to entries and exits can be more distant because support and resistance areas are more clearly defined.
Avoiding Losing Trades
Tick charts can provide confirmation for trades placed based on a time chart. For example, breakouts or trends that look healthy on a time chart can be cross-checked on a tick chart to ensure the market is unlikely to reverse. Patterns that look healthy on a time chart, but aren’t supported by a tick chart can be avoided, reducing risk.
Better Volume Analysis
Every tick candle consolidates the same quantity of trades. Therefore, volume analysis can be more accurate and show traders when smart money is moving in and out of positions. Candles with high transaction volume indicate that larger trades are being placed. This isn’t always apparent with time candles due to the arbitrary decision to close the candle at a set time.
Better Indicator Performance
Indicators are derived from the candles on a chart, so more clearly patterned candles, (such as tick candles) will provide better information to indicators.
Disadvantages
Limited Content
Trading with tick charts can be challenging because so few traders are using them. Content such as blogs, and videos are in much shorter supply, so creative ideas about how to use tick charts can be hard to come by. This can push traders to be more creative as they develop strategies on how to use tick charts effectively.
Unpredictability
Time candles always close at the same time, regardless of market conditions. The same cannot be said for tick candles. This can require traders to be more attentive to tick charts or use them as a confirmation tool for trades based on time candles.
Cryptick's Tick Candles
Cryptick fully supports tick candles with any size, and is the only platform to provide these candles in the cryptocurrency space. Additionally, a full suite of technical analysis indicators is provided, allowing traders to fully explore how tick charts can improve their trades.
Conclusion
With few drawbacks, tick candles can provide traders an edge they might otherwise be unable to find. Numerous advantages are readily apparent, and being an initial adopter of the tool may provide considerable gains.