What is program trading? Program trading is the generic term that describes the act of a computer program setting buy orders and sell order for a group of equities when certain criteria are met.
The loose definition encompasses a basket of 15 or more stocks and a value of $1 Million.
This type of trading accounts for about 30% of the volume per day, according to the New York Stock Exchange.
Institutional firms use program trading to help increase revenue and to take advantage of misalignments in the markets.
In 2009, Goldman Sachs recorded record trading profits due to its use.
What is a TICKI The TICKI is based on the stocks that make up the Dow Jones Stock Index.
Comparing the number of stocks in the DOW that are upticking vs.
the number of stocks that are downticking generates a number.
That number can be between -30 and 30.
30 meaning that all the stocks in the DOW are moving up.
The reverse is true for -30.
The TICK is the cumulative of the New York Stock Exchange market or basket of stocks.
How can you recognize if program trading is happening? Program trading, mentioned before, is the selling of an entire basket of stocks.
The DOW makes a good basket of stocks to trade, and the TICKI is a good measurement of when that program trading is taking place.
If the TICKI is outside the range of -24 to 24, generally there is some sort of program activated that is placing trades.
If the TICKI gets to 30 or -30, it is almost a certainty.
You can use this information in a couple of ways.
One: to confirm the direction of the market.
If the TICK and the TICKI are both negative and you see program trading in the TICKI, generally the market will continue down.
The opposite is true for positive TICKI.
Two: To see when a correction might take place.
For Example, the TICK is getting more positive and the TICKI is program selling negative.
This is a divergence and could indicate that the market is due for a short term rally.
When to use? The best time to use the TICKI is during the first two hours of the trading day and during the last 45 minutes of the trading day.
This is when most program trades happen.
I use an alert on my charts to tell me when the TICKI reaches a certain point.
Then I make a decision to trade.