Tick trading vs. investing
By Paul Reid
25 January 2024
There's a trading strategy that focuses on market moves so small that the media and even technical analysis traders overlook them entirely. Traders using this strategy are unbothered by market stagnation, economic downturns, or radical price shifts.
It’s called tick trading. It’s one of the most misunderstood and highly underestimated trading styles available to Exness traders, and it’s most definitely worth knowing about. If you’ve missed out on too many big rallies or crashes and are unsure what to trade in 2024, a tick trading strategy might be just what you’re looking for.
Profiting from unnoticed micro-movements
So, what is tick trading? Rather than waiting for the larger pips or points to form a trend, tick traders aim to make small profits from unnoticed micro-movements in the market. These tiny and seemingly random fluctuations are a tick trader’s gold and happen every second of every day.
Conventional traders stare at static charts for hours, waiting for significant market shifts, but tick traders are in a constant state of action. For them, the market is never truly still.
How tick trading works
Firstly, the best way to learn something is to do it, so go to your Exness personal area and ensure you use the risk-free demo account. This way, you can see live results before committing your equity to the strategy.
Tick traders tend to use higher leverage, which multiplies profit potential but also increases the sensitivity and speed at which you might lose. Before switching to a real account, you should try different levels to match your profit/risk appetite.
Let’s open a Bitcoin chart on the browser-based Exness Terminal. Because the crypto market never sleeps, there’s always plenty of price action perfect for testing the tick trading strategy, but you can apply tick trading to every trading asset.
At the top left of the Exness WebTerminal, just above the asset name, you’ll see the chart time frame options. While long-term traders use the 4-hour (4H) or 1-day (D) setting, tick traders zoom in to the 1-minute (1m) level.
Now, stretch the timeline at the bottom of the chart using your mouse until the grid shows a minute-by-minute report of the Bitcoin price. You’ll see the price is constantly jumping around. That’s because of the millions of dollars of buy and sell traffic occurring every second.
Before we set an active order, let’s talk about spreads for a minute. Exness spreads, AKA the difference between the buy and sell price, are narrow and competitive and are typically represented on the chart by red and blue lines.
To profit from your buy order, the sell price must rise above your order price. Simply put, you intend to sell the asset back to Exness at a higher price than you bought it.
For example, hit the blue Buy button on the right and confirm the order. Your demo account now has an active order. You are trading on the real market with virtual funds.
When you click on that order (directly on the chart), a window will pop up showing a very convenient way to set your Stop Loss (SL) and Take Profit (TP) levels. Change the option from asset price to money and use the + and minus - to set your limits. Let’s say $10 TP and $10 SL.
You can now sit back and watch the dance. If you feel like adjusting the TP and SL, you can simply drag the level up or down and confirm by clicking the yellow Modify button.
At this point, you might think the price will have to move a lot to generate profit, but if we zoom the chart out to show a few hours of BTC price action, you’ll see the window of profit and loss is small compared to the overall price fluctuations.
If we zoom out further to a weekly overview, the spread, TP, and SL all seem insignificant compared to the daily fluctuations.
Notice how the three different time frames do not share the same overall trend direction. For a tick trader, the price is falling. For a day trader, the price is bullish. For long-term investors, the price is going nowhere.
That is why a tick trader rarely cares about trends. Even if an asset is following an overall downtrend, there are seconds and minutes each day when the price will oppose the trend.
That said, if market sentiment suggests an asset is weakening for whatever reason, you might think twice before trading against the trend.
Is tick trading a worthy strategy?
A long-term investor will tell you tick trading is nothing more than guessing. But tick traders will say the same about long-term investing. Is tick trading legit? Most definitely, yes. Massive hedge fund institutions using AI bots apply tick trading strategies to make millions. In fact, the aggregation of such micro-investments moves the markets all the time — even in the absence of a driving force such as a news release.
The tick trading mechanics work the same way, whether you are aiming to profit $10 or $10 million.
Tick trading offers a dynamic alternative to traditional trading strategies. The ability to profit from small-scale movements can be particularly appealing in an uncertain market. For those willing to embrace such a rapid pace and risk, tick trading offers daily and hourly potential, even in the most stagnant markets.
Interesting fact: When watching an open order closely, you may see the price fall to the point where your Stop Loss turns red, and the order is in minus. Usually, this level triggers the Stop Loss mechanism; your order is immediately closed, and the loss is deducted from your overall equity. Not with Exness.
There is a very generous feature unique to Exness called Stop Out Protection, which helps you stay active in the market longer and possibly regain a positive result. While the feature is helpful for all trading styles, it is particularly beneficial for tick traders.
As a tick trader, it’s crucial, even with TP and SL, that you keep an eye on your trades. It can be both thrilling and nerve-racking to see the prices approach your limits, but when one is finally triggered and the result moves to your overall equity, you’ll want to open a new order with new limits without delay.
If you don’t have the interest or patience to sit eyeballing the charts, consider a less time-consuming strategy such as price action trading.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.