Hey Joe! How can I get a feel for what's happening in the market?
One of the things that has helped me was beginning to use tick charts for my day trading.
In a past issue of Chart Scan, I explained that there are two kinds of volume: Contract Volume and Tick Volume. Almost everyone is familiar with contract volume. It's usually shown as a histogram at the bottom of a price chart. For a given time period (5 minutes, 60 minutes, daily etc...) you can see how many contracts have been or are being traded.
However, Tick Volume shows you how many trades are being made. If there is divergence between the contract and tick volumes, it can be a warning that something is happening or is about to happen.
Use all your senses to trade the markets. If trading behind a screen, watch both tick and contract volumes. One trader I know booked a $9000 day trade profit, because he noticed a drop in volume. On the chart, prices were making new daily highs, but the contract volume, and in particular the tick volume fell sharply down. This situation is not supposed to happen in a strong bull market making new highs. Watching volume told him that something was about to happen. Sure enough, the market fell 22 cents less than two hours later.
Using your senses is part of trading what you see. If you are watching intraday, watch closely the way prices tick. While doing so, try to picture in your mind what is happening to make prices move the way they do. After a while, your comprehension will begin to expand, and you will develop a "feel" for what is happening, and you will instinctively know a good trade from a bad one in many instances.
Sign up for our FREE weekly Chart Scan newsletter.
Master Trader Joe Ross wants you to learn trading and he created products to do just that, teach you how to trade. Click here to find which ones best fit your trading style. Learn the art of trading Joe Ross' way.