Tick charts - Do the show # of price changes (upticks/downticks) or # transactions?

[Johnny]

Hi all,

It's a bit embarrasing to ask this not being new to the markets, but I wonder if I have misunderstood how tick charts are created.

I always thought tick charts were created based on # of price changes. So, with a 50 tick chart, a new bar prints after 50 ticks up/down or up/up/up... or down/down/down...

But doing some more reading on this, many resources seem to claim that they plot based on # transactions.

If it's based on # transactions, a tick chart can well update without any price movement (as 50 transactions can easily happen without price moving).

Which is correct?

Thanks in advance.

[NinjaTrader_ChelseaB]

Hello Johnny,

The term tick is used two ways.

The first way is when a transaction occurs (or a few transactions accumulated within a few milliseconds). This means that yes, multiple ticks can be received at the same price.

The second way is in relation to the smallest price fluctuation. For example the ES tick size is .25. So 1 tick above 100 would be 100.25.

[Johnny]

Thanks, Chelsea.

And tick charts are created based on # of ticks/transactions then? Not # of price fluctuations/changes?

Simply put, a 50 tick chart can theoretically print a new bar after 50 1-lot transactions in a future market?

Johnny

[NinjaTrader_ChelseaB]

Hello Johnny,

Yes, a tick chart is made from ticks which represents transactions.

Yes, a 50 tick tick chart can close a bar after 50 1-lot transactions.

[Johnny]

Thanks, Chelsea.

It seems like I've been wrong about their specific calculation then. Thanks for clarifying.

Johnny