Automated intraday trading from Tick Charts
Author: akardar1
Creation Date: 5/1/2011 5:39 AM
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akardar1

#1
Hello Gang,

I am venturing into automation from tick charts - a 200 tick chart on the Bunds for instance.
A tick is defined as a trade of any quantity. 50 lots trades @ 101 is 1 tick. Another 3 lots trade at the same price and that's another tick. A 200 tick chart, consists of 200 ticks per bar. 200 is obviously fairly high frequency, but in the noise of intraday rubbish and spikey bars this can provide an interesting alternative.

Tick charts are quite interesting, the production of tick bars happen very fast when the market is moving, and very slowly in quiet times of low activity.
This has huge implications on the development of our much loved traditional indicators.

Lets take a 5 min chart, and due to an "event", we have a huge bar. This massive bar
skews indicators, is abit annoying and because its only 1 bar, doesn't do much to our moving average
which is calculated using the last 10 bars.

Lets take the same period using tick charts and the same event results in increased activity and therefore 'many ticks', so instead of seeing a large bar, we see loads of bars developing forming a clean upswing... AND because we have many bars...... our moving averages catches up and acts the way we would expect it to.

Uploading tick data, backtesting on it may therefore provide interesting results.
There are complications down the line when wanting to automate but in theory the above should hold true.

Do we have any tick bar fans ? or tick bar haters for that matter who would care to shares their thoughts/experience ?
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Cone

#2
Tick bars make sense, but the market rarely does. It only takes 1 tick to change the valuation of a billion-dollar company or to lock-limit a futures contract. Time at a price can have meaning too. Anyway, tick bars, range bars, time interval bars, ... it doesn't matter, although it can matter to your strategy.