Page 232 - THE MARKET WHISPERER

228 PART 7 - Indicators: The Trader’s Compass

• When the intraday trend is up, the TICK will move between minus 800
to plus 1200.
Every so often during the day, you need to examine the TICK trend. For

example: while the market is trending up, is the TICK showing readings of
more than 800 with increasing speed? In other words, is there increasing
enthusiasm?

I am aware that the chart above looks like a complete mess, but if you
try to decode it according to the TICK trend, you will find that the market
rose at the start of the trading session, moved sideways, and then dropped
towards the end of the day. In actuality, when you observe the TICK in real
time, you will understand it much better than the chart above. I do not
expect you to comprehend the chart at this stage, but definitely do expect
that when you observe the TICK and the market direction in real time,
you will try to understand the relationships and influences of the TICK on
anticipated trade, especially at the points of extremities.

Summary
The TICK primarily warns of points of exhaustion where the market is
about to undergo a short-term reversal lasting some minutes. Since the
market direction influences 60% of the movement of stocks you are
trading, you need to know if the stock you are buying is at the point of
extremity and about to return.

In special cases, despite the explanation above, we may buy a stock for
intraday trade even though a TICK reading hints at an anticipated reversal.
In such a case you need to relate to the action as a scalp, which is buying
and selling for a brief period of seconds to minutes. In other words, you
must be aware of the fact that the stock may suddenly return and you must
be more attentive and take some profit at the first moment of weakness,
when the stock appears about to reverse. With a little luck, it won’t return.

The VWAP Indicator

The Volume Weighted Average Price, or VWAP, is one of the most important
tools available to the intraday trader, since it very reliably represents the
moves of many institutional traders. As we have learned, institutional
traders are responsible for 80% of the volume of stocks in which we trade.
If for a moment we disregard the public, which constitutes just 20% of
stock volume, we see that at any point in time, institutional buyers and
sellers are not acting for the purpose of short-term trade profits, but are
operating on clear instructions: “buy cheaply” and “sell at high prices.”