Tuesday, January 27, 2009

NYAD and the TICK

One of my readers asked about the relationship of the NYAD, TICK and TRIN per a post back in July 07. This post addresses one way I use the TICK as a confirmation for the NYAD. . .which, of course, is one of my prime directives for both trending and trading range market triggers and the primary component of the GE/NYAD divergence trades.
As with last week's post, these charts reflect 10 minute bars over 8 days. The first thing you notice here is that I'm much more concerned with the action of the TICK indicators (MA 12 & 24) than I am with the actual TICK chart. I've found that although the NYAD produced the best trigger signals using an 8 & 16 MA, the TICK is a bit more votatile and has a greater ATR, so I have to slow down the MAs a bit . . . yielding the 12 & 24 MAs as a better choice for viewing reversals, although the MAs still reflect a shaky character in contrast to the NYAD.
Note that the TICK generates a few false signals, both up and down, while the NYAD produces a clearer picture of what's about to come down the pipe. . . which is why if I were to prioritize these two, the NYAD would always come out on top.
For me, the TICK's primary function is as a confirmation of the NYAD trigger signals.
For another viewpoint: Dr. Brett uses a volatility and volume weighted TICK to drive many of his trades. Pop over to his site and type in TICK in the "Blog -Search" bar and delve in to see how he does it. Although his algorithm is proprietary and is used in correlation with the fee based Market Delta program, it's worth a close look.

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