THE TRUE VALUE OF TICK

Let’s look at the popular S&P 500 E-mini contract. The value of a single tick in the S&P E-mini is $12.50. We will assume the trader will do 10 round turns a day. If the trader could improve fill prices by just half a tick when entering and exiting the market, this would translate to a $250 price improvement per day. Annually, this daily savings equates to $60,000. A more active trader will yield more dramatic results and contracts with higher tick values such as the 30 year bond (Tick value = $31.25) can be even more rewarding.

UNDERSTANDING MARKET DEPTH

The Tickmaster Method (TMM) maximizes every tick. This is achieved through a complete understanding of market depth, which refers to the bids and asks of real-time limit orders. See side bar for example of market depth. To take advantage of every tick, both specific knowledge and skills are required. The tick master course gives participants a detailed understanding of market depth.

RISK & REWARD

A hallmark of a good trading system is its risk-to-reward ratio. One of the fundamental traits of the TMM is a good risk to reward ratio profile. For example, when applying the TMM to the S&P 500 E-mini contract, the maximum risk (per one contract basis) is 1 point (4ticks) or $50. However, I believe it’s quite realistic to risk $25 and be able to achieve $250. This is a 10-1 risk-to-reward ratio. Risk in relation to the reward is key element of the TMM.

CRAWL... WALK... RUN

The TTM first teaches the detailed knowledge needed to navigate market depth. Secondly, it will guide you to hone the actual skills required to implement that knowledge. The initial focus is on a good defense. An objective of the course to be totally comfortable with the market. When traders are totally comfortable, they enter and exit the market without hesitation. To achieve this a step by step foundation needs to be built. That foundation focus on defense and skill building not profit objective. Only when a trader is truly comfortable and trust themselves can they be successful consistently.

THE VALUE OF MORE OPPORTUNITIES

The Tick Master Method teaches how to maximize trading opportunities as well as test new ideas. Let’s say a trader thinks the market is going to break through a resistance point. Typically, the trader might enter the market on a break out and put in a stop at a support level, which often is around 3 points (12 ticks away) in the E-mini S&P 500. Using the TMM method, the trader would risk a maximum of one point. However, when the TMM is executed well, a scratch to two-tick risk is reasonable. Thus, a trader who lost two ticks per attempt to enter the market would have six attempts, instead of getting stopped out with a three-point loss.

WIN EVEN WHEN YOU ARE WRONG

The picture can be even brighter. The hallmark trait of TMM is using market depth to get a short-term trading edge. This advantage may involve taking a few seconds to enter and exit at the same price, which allows for a “risk-free” trade. Often it is possible to be wrong about overall market direction and still win. This results when a trader correctly identifies the short-term direction – next few seconds correct – but overall direction wrong. This happens frequently after reports are published when the market can go either way during a breakout.

SIDE EFFECTS

The short amount of time you spend in trades will lower risk and result in increased winning trades. Since your down-side risk is scratch-to-four-ticks (S&P 500 E-mini) if your not winning you are generally out of the trade. The TMM does not limit upside potential, just risk. Traders can breathe easier, knowing they won’t be trapped in losing trades for any length of time.

CONTROL IS THE DIFFERENCE

By completely understanding the short term movement of the market, great control can be exercised. The ability to enter and exit at precise points, allows for both minimization of risk and maximization of profit. When traders become proficient at this type of trading it, allows them to participate in many market opportunities.

SHORT TO LONG

The original principles of the TMM were developed from scalping techniques. As a full-time scalper, I became intimate with the short-term movements of the market, which means I mostly ignored anything much larger then a point. (Four ticks in the E-mini S&P) Frequently, I would catch the first four ticks of a strong move and then exit the trade.