Get Familiar With Tick Data

By Author: Groshan Fabiola
Total Articles: 2678
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Tick data is a reporting of each individual price fluctuation for a specific contract, showing each trade that occurred through the day of trading. Additionally, this data may include information about every change to the best bid and ask. Therefore, the tick data files which contain all these price fluctuations are very large, but at the same time they are invaluable to the traders that use them on a daily basis, providing an extraordinary insight into what is actually occurring in the cash markets.

Tick data is essential for various types of analysis because the charts may be drawn in different ways in order to compress the information and to separate easily the noise from the real trends. The most common alternative to compress tick data is by grouping it into candlesticks which are more often encountered because they require less memory, bandwidth, disk-space and many other resources. Most of the people using tick data are traders who want to backtest or develop a trading system. There are several places on the internet from which they can download these data files for free - the Gain Capital website is one, but ...
... it is not a very reliable source because there are gaps, format differences and data overlaps. In an effort to get easily accessible free data, a trader might end up losing his competitive advantage by following wrong predictions. Another free source for tick data is the Dukascopy website, but in this case the data is not easily accessible and a collection of tools is required to process it.

Instead of this, there are many strategic instruments which can be used for the main operations but the biggest challenge is to know how and where to find them. There are many companies that offer tick data but they require some conditions to be met, such as a certain amount of money in the account of the trader. An important thing to remember is that all the data received must be tested in order to ensure that it is both relevant and appropriate for usage. Usually historical information must be tested against the current trends in order to find out more information about the products which you are paying for. Taking into consideration that there is a huge amount of information to be managed, it is better to use summaries than accumulated information. There are many companies that offer the information structured in various types and they also ensure that you get great tips.

It is worth being mentioned that the Metatrader platform does not store any tick data and therefore it is impossible to make 100% accurate predictions. The system uses this data and the Close/Open/High/Low information on one minute bars to perform the simulations. Since actual tick data is not available, the platform "makes up" the ticks within the one minute bars generating a "random walk" over the four aforementioned points on the one minute bars. However, there are methods to overcome this limitation, even though they require a certain degree of software proficiency. A whole range of tools that help integrate the tick data in the Metatrader platform is available for free. Using these, a trader can download the tick data and aggregate it to backtest a Forex robot, ultimately achieving 99% modeling quality, an accuracy much greater than the platform default.

When it comes to tick data, a major challenge for most of the traders is to integrate a broad range of historical data types, taking into account the reports of different symbols, the impact of corporate actions and different nuances because this aspect requires a deep market expertise. However, it is vital for everyone to understand the importance of properly managing tick data for both production systems and backtesting of trading models.

For more resources about tick data please review http://eareview.net.