Any professional involved with e-mini trading will tell you that there is only one chart that is a leading indicator for the e-mini futures. The NYSE TICK chart is often referred to as the only indicator worth a dime for short term traders looking to exploit inefficiencies.
True trading professionals know how to use the TICK chart to gain an edge over longer term investors and other retail traders in the markets. The chart itself is quite simple in design. It plots the up ticking stocks vs. the down ticking stocks of the New York Stock Exchange. It is plotted above and below a 0 line which dictates market sentiment. The key to using the chart comes from understanding and spotting TICK extremes.
The most basic technique for using the TICK chart in trading is to fade the extremes. What that means is that when the TICK chart reaches an extreme (+/- 1000 reading) the market has attained a level of bias that it cannot possibly hold on to. Common sense would tell you that if the market can’t maintain that sort of buy or sell pressure then surely a reversal is need to correct the short-term inefficiency. Sure enough this system is very useful for picking lows and highs for the day.
Contracts traded by computer programs inside the e-mini markets account for a large percentage of total volume on any given day. These programs are heavily dependent on TICK chart readings to establish daily ranges. An extreme TICK reading is a signal to program that they need to exit their position and take profits on the move as price is going to briefly correct. Having this knowledge a smart retail trader can beat the programs to the punch by watching the TICK and establishing ranges and trend lines on the chart itself. As the TICK trends lower you can anticipate a reversal in the opposite direction before it actually registers in price.
The good traders will take the knowledge that price is set for a bounce and position themselves accordingly. Entering before the programs and exiting before the market is fully corrected can lead to very predictable and very handsome trade profits.
E-mini trading without the use of the NYSE TICK chart is not advised for even the most experienced of traders. In order to be a successful trader, individuals must take advantage of all edges available to them. The NYSE TICK is the biggest edge short-term traders have in the market for beating computer trading and long-term investors.