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Why is true tick data so important?
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Why is true tick data so important?

  #1 (permalink)
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Why is true tick data so important?

Why is true tick data so important?

I trade longer term (few hours to a few weeks per position)
I have read countless debates on this forum about datafeeds and why IB are bad, why TT and Zen are great.
Why is that tick by tick feed so important?
(i grew up on the forex market so seeing volume and flow was never a known entity)

Do you need it for bid/offer weight of trade info?

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  #3 (permalink)
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h4cked View Post
Why is true tick data so important?

I trade longer term (few hours to a few weeks per position)
I have read countless debates on this forum about datafeeds and why IB are bad, why TT and Zen are great.
Why is that tick by tick feed so important?
(i grew up on the forex market so seeing volume and flow was never a known entity)

Do you need it for bid/offer weight of trade info?

A tick is the smallest unit of the time series which cannot further be divided. So tick data is maximum resolution data. This is useful and necessary, if you trade small time frames. A scalper should definitely use tick data.

If you trade larger timeframes only, you may not need the maximum resolution offered by tick data. In this case tick data has a few advantages as well as inconvenients.

Advantages

If you use range, volume or Renko bars, these are typically built from tick data. You cannot create them from minute data. However you can use Kagi or Point&Figure Charts without using tick data.

Inconvenients

The tick data base contains large amounts of data. So if you use longer lookback periods, it will be more and more difficult for your machine to handle this data. This particularly applies to backtests.


Personally I do not use tick data, as I trade off time based charts. Also I am not a scalper and do not feel that I can use the additional information offered by the high resolution. Too much information would only cause confusion and slow down my PC.

But this a question of personal choice and habits.

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  #4 (permalink)
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Thanks Fat Tails

i knew it was the smallest data form, i just stuggled to see the advantages of this type of data unless you are jobbing/scapling the market.

Gone are those days for me, thanks for the answer and the prompt response.

Adam

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  #5 (permalink)
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h4cked View Post
Why is true tick data so important?

I trade longer term (few hours to a few weeks per position)

Do you need it for bid/offer weight of trade info?

True tick data with bid/ask information is important for backtesting because you get a much clearer idea about what your actual fills would be. Unless you have a very large advantage over the market (i.e. a very strong system who's average return/trade is much more than the bid/ask spread plus commissions), you are probably fooling yourself about what the actual returns of any system you test would be when you backtest it, especially if the system generates many trades.

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I see the logic in seeing true tick data (and that data being noted as Bid or Offer) if you are trading for very small movements like 2-4 pips, i still struggle to justify the upside of it when you are manually trading for 60-80 point gains.

What service offers the best tick data accross the board (i trade FX aswell as Futures)? I use Bloomberg with the Pro version of MC.
IQFeed seems to get alot of mentions and Zenfire.

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jstnbrg View Post
True tick data with bid/ask information is important for backtesting because you get a much clearer idea about what your actual fills would be. Unless you have a very large advantage over the market (i.e. a very strong system who's average return/trade is much more than the bid/ask spread plus commissions), you are probably fooling yourself about what the actual returns of any system you test would be when you backtest it, especially if the system generates many trades.

I have looked at any number of systems that appear to generate solid returns in the absence of bid/ask data. In most cases, when I look at the charts trade by trade, I can see that the fills are unrealistic. NinjaTrader's backtester will fill me on a buy at the low of a one minute bar whose range is two ticks if the first print of that bar is on the low, even though the system I am testing is placing a market order and it is pretty clear by looking at the chart that the low of the bar is the bid and has probably been the bid for quite awhile.

In my 25 plus years as a professional trader, I have never seen markets as competitive or as difficult to trade as they are today. Friends of mine who have made tens of millions of dollars (I'm serious) trading both in the pit and on the screen have left the business because they can no longer make money. Some have lost everything. There is huge R&D money out there looking for winning strategies. If you truly have a winning strategy that can be quantified, chances are Citadel, Goldman, and Getco have it too and will get to the market before you do with co-located trading platforms that write directly to the exchanges' APIs.

I am not say that system testing is totally without merit for the non-professional trader. I do it. A concept that on testing produces a truly and consistently awful result is probably a bad concept and would be a poor foundation for either a system or discretionary trading. (Its reverse may have value, if it can be executed). In other words, system testing in my opinion has the potential to help lead a trader away from bad ideas and toward better ideas, but I am skeptical of it's long term use as the basis for making an income (unless you're Citadel and can put unlimited resources into R&D, programming, and execution). Common sense, discipline, money management, good psychological self-management, understanding of the markets you are trading, and experience are the foundations on which successful careers are made in the trading business. And it doesn't hurt to be a quant too.

Sorry if I've gotten off topic (Brokers and Data Feeds) but one thing led to another... :-)


Last edited by jstnbrg; December 11th, 2010 at 10:34 PM. Reason: error in grammar
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jstnbrg View Post
I have looked at any number of systems that appear to generate solid returns in the absence of bid/ask data.

Hi

Are you saying with this comment then that solid bid/ask data is vital? See quote area

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h4cked View Post
I see the logic in seeing true tick data (and that data being noted as Bid or Offer) if you are trading for very small movements like 2-4 pips, i still struggle to justify the upside of it when you are manually trading for 60-80 point gains.

What service offers the best tick data accross the board (i trade FX aswell as Futures)? I use Bloomberg with the Pro version of MC.
IQFeed seems to get alot of mentions and Zenfire.

Ask yourself, for every 80 point win, how many 20 point losses do you have? That's what I was referring to when I mentioned how big your system's advantage is.

IQFeed provides quality data for charting but does not have bid/ask data. Sometimes it seems to run about a half second behind my TT feed. Trading Technologies does have bid/ask data but it's not by itself an historical data source, at least not at my firm (Advantage Futures). You can buy all the historical data you want with bid/ask information but it gets expensive fast. Look online. I have seen university libraries that will give you free access to all sorts of stuff if you're a student or faculty member. If not, maybe you know someone who is, and who knows how to use a memory stick . I have no experience with other providers except CQG which is the gold standard of charting and is expensive, and I don't know if CQG provides bid/ask data but you should ask them.

If you are using a Bloomberg terminal, I would think you'd have access to a great deal of information. $1,500/month should buy you almost whatever you want.

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  #10 (permalink)
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jstnbrg View Post
Ask yourself, for every 80 point win, how many 20 point losses do you have? That's what I was referring to when I mentioned how big your system's advantage is.

IQFeed provides quality data for charting but does not have bid/ask data.


I don't know how u can tell this if u are using IQFeed and Investor rt, IQFeed has the bid ask data and is one of the best for that purpose!!!

Have u read some thread in this forum about data feeds, especially this one https://futures.io/elite-circle/3873-analysis-comparison-different-data-feeds-platforms-bid-ask-studies.html?

Edit: sorry, u can't see that thread cos is in elite section, but anyway u can find a lot of info about IQFeed in this forum.

Take your Pips, go out and Live.
Luke.

Last edited by LukeGeniol; December 11th, 2010 at 09:59 PM.
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