Tick Index

What is the Tick Index?

The tick index compares the number of stocks that are rising to the number of stocks that are falling on the New York Stock Exchange (NYSE). The index measures stocks making an uptick and deducts stocks making a downtick. For instance, there are approximately 2,800 stocks listed on the NYSE. In the event that 1,800 stocks have caused an uptick and 1,000 stocks to have made a downtick, the tick index would rise to +800 (1,800 - 1,000).

Understanding the Tick Index

The tick index is a well known indicator utilized by informal investors to see the overall market sentiment at a given point in time. Seeing the ratio of "up" stocks to "down" stocks permits traders to settle on quick trading choices that are dependent upon market movement. Regularly, readings of +1,000 and - 1,000 are viewed as limits; traders ought to be aware of overbought and oversold conditions at these levels.

A tick index is a short-term indicator, frequently just important for a couple of moments. For traders hoping to go into bullish sentiment, a positive tick index is a decent indicator of overall market confidence, as additional stocks are trading on an uptick compared to those trading on a downtick. Nonetheless, traders ought to recall that the tick index is an exceptionally speculative identifier of market sentiment at a specific point in time and is thought of as untrustworthy for traders who utilize longer-term strategies.

Illustration of the Tick Index

Trading with the Tick Index

Rangebound Market: The tick index can be utilized to assist with timing passages and exits in choppy markets. Traders could open a long position when the tick index falls below - 1,000 and exit when the indicator gives a perusing of +1,000. Traders could match these readings with key support and resistance levels from an existing trading range before entering the market.

Trending Market: The tick index can stay above or below zero for extended durations when a stock is trending. On the off chance that a market is trending higher, traders could take entry when the indicator returns to zero as opposed to waiting for it to return to - 1,000. Different indicators could be utilized related to the tick index to increase the likelihood of an effective trade. For example, traders could utilize a moving average with the tick index to affirm the market is trending.

Divergence: Traders can search for divergence between the tick index and price to check the underlying strength of a market. For instance, assuming that a stock's price is making worse low points, yet the tick index is making higher lows, it shows that the merchants might be losing momentum. On the other hand, in the event that a stock's price is arriving at new highs while the tick index is neglecting to register new highs, it recommends conceivable weakness in the common trend.