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"Barry Small" <unitel@xxxxxxxxxxxxxx> wrote:
> I just read a response and checked the online manual regarding the
> "bouncing Ticks" method. I guess its better than nothing, but why can't it
> go back and check the system in proper tick order? If I test on "tick
> Bars" will this be an exact simulation?
These are good questions, and they have no short quick answers.
The bottom line issue is that in doing technical analyses with a
computer, you must have the data in some form on your computers hard
disc.
Time Series data basically comes in two of these forms:
1) ticks
2) intervals (aka 'bars')
Ticks are a combination of a price and a time, for instance:
YYYY/MM/DD HH:MM 99999.99 // one tick
Intervals are 'made' out of ticks, instead of having 500 ticks in one
hour, only the OPEN, HIGH, LOW, CLOSE and DATE/TIME of that hour are
used (or other combinations).
Intervals are a form of compression, and in this case, information is
lost by the compression (as opposed to ie zipping a large file, where
no information is lost).
Now you can try to compensate for the loss of information, by using
something like the 'bouncing ticks' mechanism. And when you do that
you should realise you are making assumptions on the dynamics of the
data. When you test solely on ticks, you don't have to make that
extra assumption, so testing on ticks would give more accurate
results.
Unfortunatly, because of the way the PC hard- en software world has
developped, a program that can backtest a system on thirty years of
ticks is much harder to write than a program that can backtest on
13.000 ticks.
Unfortunately, 13.000 ticks is not enough for validating day-trading
systems.
So what most -intra day trading system- developpers using TS do, is
to test their systems on 1 to 5 minute intervals. Which is not
great either actually, because you have to combine the results of
many 1-min charts, to get to a system result over a couple of years
of data.
Bottom line is that a program like TS is not the best tool in the
world for doing intra-day system development. You can use it as a
link between a system you developped (elsewhere, like your own
written software) and realtime data.
Just some quick thoughts, maybe they help,
Regards,
Guus Prick.
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