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Convert Market Noise into Profitable Trading Data

Here is a special way to use the $TICK to help you make money in the market.   Since what you are going to see is a strategy about using a 1 minute chart, you will need real time data.   This can come from trading software provided by Schwab (or other competitors).   We hope you enjoy and use this trading information.

How to convert "market noise" into profitable trading data that can make you money ...

This chart shows the 1 minute $TICK with large up and down gray bars.  Most investors ignore this chart and data because it looks like nothing but noise.  But it isn't ... it can be magical data if you do the right thing to it. 

If you look below at the second and third chart, you will see what we mean, and you will also be able to convert this data into powerful trading information.

$tick chart

This second chart is the very same one as the above chart, but with some very important changes.   Notice the red, yellow, and green lines in relationship to each other as well as to the two Horizontal lines.

They non-horizontal lines are trend lines that can be created in the following way:
The red line is a Smoothed Moving Average set at 10 ticks.
The yellow line is a Smoothed Moving Average set at 20 ticks.
The green line is a Smoothed Moving Average set at 80 ticks.
(Schwab's StreetSmart Pro is one trading platform where you can get Smoothed Moving Average capabilities.)

Also note the red and green horizontal lines.   These lines are set at zero and represent a Neutral line.   So, above the lines is positive and below the lines is negative. 

On the right side panel, at 9:34 AM the red line went negative.   At 9:53 AM, the yellow line followed and went negative.   Both were below the (80 SmMA) green trend line with the green line trending lower at that time. 

That was the trigger for a down movement and an intra-day shorting condition.  At 3:01 PM, BOTH the red and yellow lines had moved back above the horizontal line for a shift to a positive bias for the first time during the day ... which was an exit point on a short.

Our third chart shows the merging of the 1 minute $TICK chart with a 1 minute SPY chart so you can see the correlation. 

Look to the right of the red vertical line in relationship to these comments:   Note how the SPY went down when the Red and Yellow lines both went below the neutral lines at 9:53 AM.   Thereafter, the SPY remained below its 80 minute Smoothed Moving Average all day, and it did so until the Red and Yellow TICK lines went above the horizontal neutral lines ... and that ended the short trade.

Two later charts as an example ...

This first chart shows the same as above, except I didn't show the red, 10 minute moving average.  In this chart, the equilibrium line is still the red/green lines in the middle.  (The upper and lower lines are just extreme levels.) 

This chart covers 2 and 1/2 days of trading.   Now look at the chart and note that the green (Smoothed Moving Average) of 80 went from negative early on Day 1 in the morning to Positive around 12:45 PM.    Then, it remained positive for the rest of the Day 1. 

On Day 2, it continued its positive movement through Day 2, and into the middle of Day 3 when this particular study was concluded for the posting.   See the next chart ...

In this chart, we overlaid the above chart with the SPY so you could see how they correlated.  As you can see, just after 12:45 AM on Wednesday, the SPY also moved up and above both trend lines for a nice little profit run.  

Note: Since these are 1 minute charts, I use them personally for day trades and/or short term trades along with other 1 minute data such the $DVOL, $VIX, and the $NYBR.  (All of these symbols can be found on Schwab's StreetSmart Pro.)

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