Of Tick Charts and Timebased Charts - A cursory Look

I have always been a user of time based charts and over the last 6 months have slowly caught onto the tick based charts. I never really had a chance to compare Tick Charts with Time based Charts to see how they compare and hold up with regard to the 4 key Technical Analysis Principles of:
1. Market alternates between range expansion and range contractions.
2. Momentum precedes Price.
3. Trend has higher probability of continuation than reversal.
4. Trends end in a climax

Since it being -35 windchill in Chitown this weekend, I decided to test the performance of Tick charts and time based charts for Principle #3 Continuation Entries using 3 of LBRs models:
1. Holy Grail/IT Buy
2. 5 SMA
3. New momo highs/lows

To be consistent, the data tested is from 1/1/08 to 2/08/08.
Targets are 1 ATR on timeframe chosen and Risk is the opposite side of Keltner Channels.
NOTE: Sample Size is Small and may or may not fall under the statistically significant realm...But again the goal of this whole exercise is to better understand the differences between timebased charts and tick based charts. Testing done on TS.
NOTE#2: To be consistent with Time based charts, the Tick Charts have their data setting from 8:30 CST - 3:15 CST so that i can perform an apples to apples comparision.

Model #1: Grail Buy/Sells
Enter @20 EMA. Target 1 ATR Stop @ Opposite Keltner Fixed at time of position entry.
@ES
Timeframe Net Profit #of Trades % Profitable
400 Tick $712.5 132 70%
800 Tick -$1075 67 64%
1600 Tick -$975 38 58%
3200 Tick $1800 21 76%

Lets see how the numbers stack up if we use same strategy on 1, 3, 5, 15 mins
Timeframe Net Profit #of Trades % Profitable
1 min $3525 132 80%
3 min -$12.5 44 68%
5 min $2362.5 28 86%
15 min $1537.5 10 80%

Bottom line: Time based Grails outperform Tick based Grails.

Model #2: 5 SMA Trade
After 8 closes on one side of the 5 SMA and the first close on other side of the 5 SMA, a trade is taken in direction of original thrust. Buy or Short next bar at market.
Timeframe Net Profit #of Trades % Profitable
400 Tick $37.5 315 81%
800 Tick -$1537 156 78%
1600 Tick -$2050 74 72%
3200 Tick -$1487 36 86%
NOTE: Nice % Profitable #s but Net Profit very small....May be using Wider Stop...Using Fixed Bar Time Stop may improve the model.....?

Timeframe Net Profit #of Trades % Profitable
1 minute $1225 196 80%
3 minute -$1137 64 80%
5 minute $325 46 83%
15 minute $1025 13 100% (WOW!!!!!)

Bottom line: Timeframe based charts comfortably outperform Tick based Charts.

Model #3: New Momo Highs/ Lows
Price and 3/10 makes new 30 bar highs and pulls back to 20 EMA for Longs and vice versa for Shorts. Target 1 ATR Stop @Opposite Keltner. Notice how small the # of trades are...
Timeframe Net Profit #of Trades % Profitable
400 Tick $475 56 61%
800 Tick $1250 33 67%
1600 Tick -$225 11 64%
3200 Tick $1337 10 70%

Timeframe Net Profit #of Trades % Profitable
1 minute $1363 50 78%
3 minute -$162 19 74%
5 minute $625 13 77%
15 minute -$112 5 60%

Bottom line: Time based charts have better % profitability but overall less Net Profit. BRING ON 1 min and 5 min...

Conclusion: Based on the 3 models we discussed above, it can be safely concluded that timebased Charts are better for Trend Continuation Setups than tick based charts.
Next week i intend on updating the various other models and see how the numbers pan out...

NOTE:
A timebased Chart is fixed between platforms..in other words, a 3 min bar has same Open, Close, High and Low. A 400 Tick bar differs from platform to platform. TS has different O, C, H, L compared to eSignal. Is it worth the hassel and pain of watching the Tick Charts as opposed to Timebased chart? Next Update will compare performance of Divergences and Power Buy/Sell between tick charts and timeframe charts.....Stay tuned....
till then....Signing Off.....Raj

BTW....Any questions, comments or model suggestion, welcome for discussion :-)
Atleast i have stuck my neck out there to challenge the validity of using Tick Charts for Trend Continuation Models....