Tick trading isn’t all that different from other forms of day trading, the main difference is the duration. Following the trend and trading the trend is still your best bet, pun intended! With tick trading, the trend you’ll be trading is the micro-trend. If you haven’t already devised your own micro-trend trading strategy, here’s one for starters that will put you in good stead.
Riding the trend
A trend, by definition, is the propensity for the market to go in a certain direction, either up or down. If you have been trading with the BonusTrade app, you will see that asset prices only tend to trend sometimes. When it’s trending, it’s easy pickings. When it’s not, you might as well be tossing a coin.
So when is the best time to trade?
You got it – when the market is trending! So the most reliable trading strategy is to go with the trend. Remember,
The trend is your friend.
The fractal pattern of trends
Look at the trend patterns below and you can see clearly that each “wave” of a trend comprises smaller waves with a similar pattern. And then there is another set of even smaller waves within the smaller waves. This can go on and on all the way to the tick level if you zoom in and out of any chart.
You can clearly see that the trend is Up before the red line. There is a trend reversal at the red line and the trend is Down after the red line.
If you already have the BonusTrade app installed, try zooming out to see the bigger waves and the bigger trend. Zoom in to see the smaller micro-trends, all the way to the tick level.
Zooming out helps you see the bigger picture and to confirm the bigger underlying trend before you trade.
Trading the micro-trend
Tick trades are essentially micro-trades so tick trading and micro-trends are made for each other.
Take a moment to look at the fractal trend patterns again and see if you can come up with a way to trade micro-trends that would be intuitive and makes total sense to you.
So do you trade up or down?
And when is the best time to enter the trade?
If you need a clue,
“the trend is your friend”
The red spots mark the retracement for the Up trend, that would be the best spots to enter a 5-tick Up trade. Remember, when the price pulls back, it marks the retracement – a confirmation of entry. If you tap to trade at this point, your entry spot price is the next tick. Don’t worry if the price dips when you enter, if you are trading a micro-trend backed by a bigger underlying trend in the same direction, the odds of the next few ticks going your way are on your side.
The strategy in 3 easy steps
Is the market trending? Zoom out to at least 2 levels to confirm the bigger trend. It should be very clear and very obvious. Technical indicators can also help confirm trends.
If so, identify the trend. Is it up or down? Always trade in the direction of the trend.
Wait for the pull back or retracement to enter a trade. A trending market tends to move in waves, it makes a move and then relents a little before pushing on. Rather like taking two steps forward and one step back. This is when you want to enter your micro-trend trade.
This is just the core strategy, you can play around with it to tweak, fine-tune and come up with your own micro-trend tick trading strategy. Try adding a technical indicator or two to help you spot and confirm trends.
Micro-trend trading caveat
As with all good things, at some point, the trend will come to an end. You need to hone your situation awareness when trading and be quick to spot when the trend ends, not just the micro-trend but the next bigger trend as well.
I will talk about spotting the end of trends and the reversal of trends in an upcoming post.
- Trade only when the market is trending.
- Trade micro-trends within a larger underlying trend in the same direction.
- Get in on the retracement of a micro-trend.
- Be aware of when a trend ends.
Now try it out for yourself. You’ll need a lot of practice spotting trends and riding trends and knowing when to get off. If you haven’t already downloaded the BonusTrade app, it’s totally free to download and free to use. No sign up necessary. You get a $10,000 virtual money demo account to practice with right off the bat when you install the app!