Now that you understand what a tick chart means, you probably want to learn how to get the most out of it. Here are three simple tips you can use to utilize tick charts more effectively:

1: Watch for Volume
Tick charts show you a measurement of total trade volume per tick. It's essential to watch this volume measure because it shows you where the money is going. You might be tempted to just follow the trend of the bars, but it's easy to fall into traps that way, if you don't attend to the trade volume indicator below. Set your volume indicator to show trade volume and you can distinguish amateur trade activity from professional trading; amateurs will tend to trade at smaller volumes, and professionals at notably larger ones. If you follow the high-volume peaks indicating professional activity, you are likelier to see returns from their projections; amateur trading is a less reliable indicator of upcoming trends.

2: View Detailed Activity
With conventional time-based charts, periods when trading is slower and smaller in volume are overemphasized. During these times of day, such as after-hours and lunchtime, volatility is lower and trades are less frequent. Using tick charts, trade data is stretched and compressed to allow you to see trends as if the pace of trading were constant throughout the day. This makes it easier to see the slow-paced trends after hours, as well as magnifying the complex activity that occurs during the quicker parts of the day.

This allows you to get in on breakouts faster as newsbreaks. While, for instance, a 3-minute chart will only update at fixed intervals, a tick chart will show clearly and immediately if there is a sudden increase in trade activity.

3: Nothing is 100% Predictive
Although tick charts are a very valuable tool to have in your financial toolbox, be sure to take into account the other tools and techniques you have at your disposal. Like every tool, tick charts are imperfect predictors, and even with this kind of help you will occasionally make bad trades. It's not the end of the world when you do, nor does it mean that your tools are worthless to you. Take the time to analyze what happened in your bad trade and add that to your stock of knowledge.

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