The Tick is an indicator for the NYSE that measures the number of stock issues trading on an up tick versus a down tick. An uptick of +1 is a buy order, and a downtick of -1 is a sell order. It takes a buyer to execute a sell order, and it takes a seller to execute a buy order. In the perfect world, market makers would always match up a buy order with a sell order for a 0 reading. However, when massive institutional traders buy or sell across entire sectors, market makers have trouble matching up a buy order with a sell order by the time regular trading ends, and so the TICK closes for the day far away from zero.
Normal retail trading takes place between -500 and +500. A reading less than -500 suggests institutional trader selling. A reading greater than +500 suggests institutional buying. Years ago, I created the trading system that is used today in the stock market prediction algorithm where, on days the TICK shows institutional trader activity, I track sector performance for that day to get an idea of what sectors institutional traders bought or sold.
My system of using the TICK and sector performance charts to guess what institutional traders are doing has been superior to using level II quotes where trading algos blind traders from tracking what institutional traders are doing by executing a bid or ask order, and then rapidly cancelling that bid or ask order.
Institutional traders do not want anyone else to know what they are doing, until they are positioned in the trade, just like you don’t want other people knowing your trades until you position. There is no way to know what institutional traders are doing as they are sworn to secrecy. Many services that promised to spy on institutional traders and track large block orders as a sign of institutional trading failed to give meaningful signals for their customers and have since gone out of business over the years, but my simple TICK strategy continues to live on. My TICK strategy focuses on market makers ability to match up a buy order with a sell order by the close of trading, rather than on trying to monitor large block orders.
The TICK is one of the few indicators that is given +2 points in the stock market prediction algorithm.
Here is a sample of a TICK chart that you will see in the stock market prediction show broadcast every Saturday night on my YouTube channel:
In the chart above, because the TICK ended the day at -613, it suggests institutional trader selling. Now we look at sector performance for the same day:
Two more things indicate institutional traders selling in the chart above. Do you see them? First, the selling was broad based across all the major sectors. Amateur traders like you and I don’t work together to move entire sectors in uniform like that. Second, notice that offensive sectors were sold while defensive utilities held up best. Amateur traders generally don’t tend to be sector aware and make trading decisions based on top down sector analysis, all in lockstep with each other in great enough levels to move the sector daily performance like this. Think of these two things as the footprints that institutional traders leave behind.<< Back to Glossary Index