Tick Charts are real-time charts that offer allow the traders to look into price movements of the assets against the volume being traded each and every moment. Honestly, Tick Charts can be a nightmare unless you know how to interpret the data.
Because the Tick Chart allows to see how much volume is being traded at any point in time, you can actually assess the direction in which the price of the asset will move.
Understanding the Tick Chart
A Tick Chart will usually show two graphs one after the other. The top quadrant will show you how price is moving against time. The quadrant below that will show you the number of volumes being traded. The area that shows the traded volume is a bar char. Each bar shows a specific volume.
The quicker the bars form, the greater is the volume that moves in market. The slower the bars close and slower a new bar is formed, the lower is the volume that moves in the market. A large order may be broken into subsequent smaller bars and hence, you will see the bars forming quickly.
Here is an example of USD trading against JPY:
In the above example you can see that as the number of bars highlighted in green formed very quickly with high volumes being traded. You can see how the price of Yen shows a sharp decline in the top quadrant. This means that Japanese Yen is becoming stronger compared to US Dollar. This means that number of JPY per USD will fall. Because the USD/JPY pair is falling quickly, your best bet will be to opt for Put Option.
Let us take another example of Euro trading against USD:
You can again see from the highlighted block of bars in the lower quadrant that a large volume was being traded very quickly. As more Dollars are being traded, the value of Dollar increases while value of Euro goes down. In this case, the downward trending price line shows that USD is getting stronger against Euro. So, you will go for a Put Option again.
Always Remember: In Tick Chart, 1 tick = 1 trade and 1 bar = total volume of trades.
Tick Charts are very useful for short term trades in binary options. Strategies like 60 Seconds trade or 5 minutes Binary Options trade can be used with greater accuracy using this type of chart. However, if you don’t know how to use the chart properly (which can be pretty difficult) at the beginning, it is always wise to work with market sentiments or ‘Traders Choice’ as we discussed in our basic course.