Value of Perfect Information

One of the caveats of being an intra-day scalper is that opportunity will be lacking without heightened levels of Volume & Volatility.  While Volume and Volatility is a fundamental criteria for many trading systems, the intra-day scalper is especially reliant on these conditions. 

This being the case, how does an intra-day trader find clues that are often symptomatic of low opportunity?  The quickest and least intensive method I’ve found in gauging the markets’ appetite for risk or risk aversion is $TICK and $ADD.   Indeed, these indicators have been discussed at length (especially for ES and SPY traders) but there continues to be a lot of misunderstanding as to how these tools can provide benefit for the intra-day scalper. 

The most important take away when reviewing the below image is to notice how truncated both $ADD (very tight range) and $TICK (No readings in excess of +/-800) are.  Additionally, NYSE down volume out swamped up volume by a healthy amount (see image) even though NYSE advancers were beating decliners.   Its been my experience that when these conditions (or “cross currents”) are present, the market will demonstrate lower amounts of enthusiasm and thus become more problematic to trade.

This is not to say one cannot make money (you can) but to do so, requires additional discretion.

This is Today’s NYSE Tick there was  only a few  Big + 750  buyers to get the  Rally push started  but no real follow through so far.

=================================================================================

This is Wed 08-19 08 Rally day. Notice the Big +750 to  + 1000 Ticks all day. Those are the Big boys.

TICK 1529

NYSE TICK data is for 10 day moving average.

The NYSE TICK  is commonly used as a short term trading indicator. It represents the number of stocks ticking up minus the number of stocks ticking down.

If the market trend is up and cumulative TICK is more than +5,000, there is a strong chance of a seeing a retracement.

May 13, 2009 TICK  +2,097

May 8, 2009  TICK  +2,338

May 11, 2009  TICK +2,226

May 12, 2009  TICK +2,875