V.9:6 (228-229): Picking Tops And Bottoms With The Tick Index by Tim Ord

Picking Tops And Bottoms With The Tick Index by Tim Ord

As a young trader, I first used moving averages, point and figure charts and some Gann methods and then moved on to the Elliott wave fad. But none of these methods or techniques really gave me a strong signal for a top or bottom in the market. What I did learn in my early years as a trader was that running with the masses is a guaranteed subscription to failure. It is said that 80% of the people who trade the markets lose; from my experience, I'd say this is true. The losing majority fund the marketwise minority.

I wanted a trading method that kept me on the opposite side of the losing public and gave me a more absolute signal in picking tops and bottoms in the market. I also wanted an undiscovered method that the trading masses hadn't overused. That eliminated moving averages, which got me short at bottoms and long at tops, and Gann and Elliott methods, which pointed to a top or bottom after it occurred.

What I found was the tick index, carried by most live intraday quote services, and I have found it to accurately forecast market tops and bottoms and indicate buy and sell levels. This method uses intraday uptick and downtick readings of the New York Stock Exchange (NYSE) to forecast tops and bottoms in the Dow Jones Industrial Average (DJIA) and to generate buy and sell signals that span one to 10 days.

UPTICKS AND DOWNTICKS

The tick index is the difference between the number of issues trading with the last trade higher (an uptick) from the previous price and issues trading with the last trade lower (a downtick) from the previous price. For example, if exchange X has 500 issues trading on an uptick and 250 issues trading on a downtick, the tick index would be +500 - 250 = +250.