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the definitions of uptick and downtick


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the definitions of uptick and downtick

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  #1 (permalink)
 sureway 
San Diego
 
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Today I have been examining the concept of uptick and downtick. And start to question my understanding of them.

Here are their definitions from TradeStation.com

Uptick is a tick that is higher than the previous tick (or the same as the previous tick). A downtick is a tick that is lower than the previous tick (or the same as the previous tick). Adding upticks and downticks together provides the total number of ticks.

Suppose we have the following toy example of 5 trading records (only prices shown here). The price started with 101 (dropped from a higher price say 102), dropped to 101 and then climbed up to 101.

101
100
100
100
101


According to TradeStation's definitions, we have 4 downticks (ticks 1 to 4) and one uptick (tick 5). Now I am questioning whether this is the correct understanding of mine or whether the definitions are wrong. Here is a reversal point from a decrease to an increase. The buy side need to eat up all the selling orders to get the 101 price (tick 5). Hence the 3 100$ ticks should be considered as part of the buying force (upticks) instead of the selling force (downticks).

As I am new to the field, just wanted to check whether I missed something out here. Thanks a lot!

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  #3 (permalink)
 iantg 
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Hi sureway,

There is a good bit of noise here that you need to be aware of. When the price oscillates between the bid price and ask price on the same price level this should be considered a neutral event. Take for example a price level:

Bid = 2000.00 / Ask = 2000.25
And let's say that as the limit order queue is being cleared and matched to the market order queue you may have the following "last price" series created.

2000.00
2000.25
2000.25
2000.00
2000.25

Once this price level finally has a victor and either all of the bid limit orders are cleared, or all the ask limit orders are cleared the market will move to the next price level. Let's say that all the limit orders on the 2000.00 price level are cleared.... As a result of this the market will move down to the next price level which will be

Bid = 1999.75 / Ask = 2000.00

So I would characterize a price level change as a significant event that should be noted and included in part of your analysis. But ticking back and forth between the bid and ask price on a single price level is just the market filling both ends of the limit order queue and this is going to happen on every price level, so I would consider this noise.

Anyway, hope this gives you a slightly different perspective, and that this has some value for you.

Best of luck!

Ian

In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #4 (permalink)
 sureway 
San Diego
 
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Ian, thanks a lot for your good comments. Yes the price jumps between ask/bid sounds to follow a random process. It seems that only with bid/ask tick data, we would have better chance to detect the buying/selling force at a micro level. Correct me if I get it wrong. The changes of the bid/ask prices show the direction of the move, and then the corresponding volumes reflect the buying/selling forces.



iantg View Post
Hi sureway,

There is a good bit of noise here that you need to be aware of. When the price oscillates between the bid price and ask price on the same price level this should be considered a neutral event. Take for example a price level:

Bid = 2000.00 / Ask = 2000.25
And let's say that as the limit order queue is being cleared and matched to the market order queue you may have the following "last price" series created.

2000.00
2000.25
2000.25
2000.00
2000.25

Once this price level finally has a victor and either all of the bid limit orders are cleared, or all the ask limit orders are cleared the market will move to the next price level. Let's say that all the limit orders on the 2000.00 price level are cleared.... As a result of this the market will move down to the next price level which will be

Bid = 1999.75 / Ask = 2000.00

So I would characterize a price level change as a significant event that should be noted and included in part of your analysis. But ticking back and forth between the bid and ask price on a single price level is just the market filling both ends of the limit order queue and this is going to happen on every price level, so I would consider this noise.

Anyway, hope this gives you a slightly different perspective, and that this has some value for you.

Best of luck!

Ian


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  #5 (permalink)
 iantg 
charlotte nc
 
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Posts: 405 since Jan 2015
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sureway,

Yes, you have it right.

If you focus on only the price level changes, then you can cut your noise down considerably.

Ian


sureway View Post
Ian, thanks a lot for your good comments. Yes the price jumps between ask/bid sounds to follow a random process. It seems that only with bid/ask tick data, we would have better chance to detect the buying/selling force at a micro level. Correct me if I get it wrong. The changes of the bid/ask prices show the direction of the move, and then the corresponding volumes reflect the buying/selling forces.


In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #6 (permalink)
 NickWhite 
Los Angeles+CA/USA
 
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Considering a "neutral" tick, I was told that Tradestation Tick Volume only counts the true uptick and downtick in the volume. I didn't understand the point at the time. Is that where the "neutral" tick trades figure in?

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  #7 (permalink)
bradhouser
Merida, Yucatan, Mexico
 
 
Posts: 117 since Nov 2010
Thanks: 15 given, 69 received


sureway View Post
Today I have been examining the concept of uptick and downtick. And start to question my understanding of them.



Here are their definitions from TradeStation.com



Uptick is a tick that is higher than the previous tick (or the same as the previous tick). A downtick is a tick that is lower than the previous tick (or the same as the previous tick). Adding upticks and downticks together provides the total number of ticks.



Suppose we have the following toy example of 5 trading records (only prices shown here). The price started with 101 (dropped from a higher price say 102), dropped to 101 and then climbed up to 101.



101

100

100

100

101





According to TradeStation's definitions, we have 4 downticks (ticks 1 to 4) and one uptick (tick 5). Now I am questioning whether this is the correct understanding of mine or whether the definitions are wrong. Here is a reversal point from a decrease to an increase. The buy side need to eat up all the selling orders to get the 101 price (tick 5). Hence the 3 100$ ticks should be considered as part of the buying force (upticks) instead of the selling force (downticks).



As I am new to the field, just wanted to check whether I missed something out here. Thanks a lot!


Based on the definitions you gave, there is one downtick, three non-ticks, and one up tick. Since it says “or the same as the previous tick”, then the three “non-ticks” count as both upticks and down ticks. So the net is zero. Total is either 1 down and 1 up, or 4 down and 4 up. I could be wrong. I think it is 4.




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  #8 (permalink)
sunrisus
bakersfield, CA
 
 
Posts: 3 since Feb 2016
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Within dev env help, search volumeup or volumedown, follow the guide, you should be able to obtain up or down volumes.

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