Day trading requires intimate knowledge of market actions and the ability to read various charts to gain actionable insight. It can be high risk, but it can also be high reward. Day trading is an area where the phrase "knowledge is power" couldn't apply more. You need as much clear, accurate and actionable insight as possible. Because many small or amateur day traders are trading against large corporations, understanding tick charts and time charts becomes essential.
Tick charts and time charts are desirable tools for day traders to visualize trading activity. Volume bars on tick charts allow traders to see market trends and identify entry points, while time charts offer consistent visualization of market activity throughout the day. Read on to learn the pros and cons of tick charts vs. time charts and how both can become part of your day trading analysis.
What are Tick Charts?
Tick charts represent intraday price action. Each time a certain volume of transactions is executed, it creates a new bar. This can be represented as a candlestick, line or other form on the volume chart. Every time a certain amount of transactions gets executed, it creates a tick, thus the name tick chart. Traders can set trading tick charts to show the number of transactions for each bar, allowing for a customized chart for desired trading activity. This is helpful as market activity can vary widely.
Most traders prefer candlesticks and bar charts. Both charts provide the same information, although candlestick charts are color-coded and easier to see.
In highly liquid markets, a tick for 100 transactions executed won't provide valuable insight, while a tick for 1,000 or 10,000 trades is more useful.
Pros
- Gather information about market activity
- See trends over time
- Can choose volume interval charts, tick interval charts and range bar charts
- Can see clearer swings
- Better visualization of trends
- Better measurement of volume
Cons
- May not provide useful information during low-volume periods
- Requires experience and skill to understand and create actionable insights
What are Time Charts?
Time charts, also called time series graphs or time series plots, are data visualization tools that show data points at successive intervals of time. Each point corresponds to both a time and a quantity being measured.
Day traders can choose different time intervals. Many day traders use 15-minute charts to identify patterns within the day to identify major intraday price movements and detect key entry points.
Pros
- Understand the trends within a set time period
- Better identify market entry points
- Visualize market performance
- Note intraday opportunities
Cons
- Requires understanding and practice to read charts clearly
- Doesn't visualize trading volume as clearly as tick charts
Comparing Tick Charts vs. Time Charts
Tick charts vs. time charts offer valuable insights to day traders. For many day traders, both charts offer valuable insight. Here's how they compare.
1. Visualization
Tick charts and time charts offer visualizations of the same data. While time charts provide information at consistent intervals, tick charts show greater information during high trading volume times. Both are useful and provide unique insights depending on market performance factors.
In addition, the tick index can compare the number of rising stocks to those falling on the New York Stock Exchange (NYSE), offering visualization of overall market trends.
2. High Volume Performance
Tick charts vs. time charts perform differently in certain trading activities. During high volume times, a tick chart generally performs better, offering greater insight and clearer visualization of trading actions.
3. Low Volume Performance
In contrast to high volume, time charts perform better during low trading volume times. In deciding on tick charts vs. time charts when there is low volume, you'll be able to gain greater insight from a time chart, which creates a chart based on standard reporting intervals rather than total volume. A tick chart may show no activity if the volume is especially low.
4. Reporting Volume
Investors can customize reporting volume for tick charts. Tick size customization can allow investors to adjust charts to specific markets or individual stocks. On the other hand, time charts offer reporting at standard intervals, regardless of market activity. Time charts form a new bar or candle based on a particular timeframe, like every minute, 15 minutes, hour, day or other intervals.
Choosing Tick Charts vs. Time Charts
For most day traders, tick charts and time charts set to different intervals can offer important information to monitor market trends and intraday price action. You can choose to use one or both; however, the more information you have, the better to assess opportunities and market trends. Prepare for day trading by learning more about the risks and then find the best day trading charts, best day trading software and the best stock charts.
Frequently Asked Questions
Are tick charts better than time charts?
Tick charts and time charts offer advantages, and some traders prefer one over the other. Both can be used in market analysis.
What is the difference between a tick chart and a one-minute chart?
Tick charts and one-minute charges show different information. Tick charts show trading information as trades occur, while one-minute charts show prices in one-minute intervals if there is a trade.
What is the most accurate chart?
Both tick charts and one-minute charts can provide accurate information for traders. Which is more accurate for your trading needs will depend on your trading style and information needs.
About Alison Plaut
Alison Plaut is a personal finance and investing writer with a sustainable MBA, passionate about helping people learn more about sustainable investing and long-term wealth building for financial freedom. She has more than 17 years of writing experience, focused on investments, business, personal finance, and real estate. Her work has been published in The Motley Fool, MoneyLion, and regularly appears on Benzinga.