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* First, bouncing ticks (and related concepts) is not
a 'ts problem', its a set of assumptions by omega to
try to determine how the market moved within each
bar(be it a day, hour, minute, etc) when the intra-bar
data isn't available.
* Its only an issue when you have 2 or more limit or
stop orders filled in a bar.
* Because all you have in a bar is open, high low
close, its imposible to know what was reached first:
the high or the low of the bar. TS assumes that if the
open of the bar is closer to the low than to the high
the price moved: Open->Low->High->Close. While if the
open is closer to the high the movement was
Open->High->Low->Close
* ts will 'bounce' the price from any filled limit or
stop order in the opposite direction of the assumed
price movement searching for another order. (Again: it
only affects results when there are two or more
stop/limit orders active in a bar).
Lets assume that you have a bar with the following
prices:
High 110
Close 108
Open 102
Low 100
Because the open is closer to the low than to the
high, ts assumes that the price movement is
Open->Low->High->Close.
Now suppose you have an order to buy at 101 limit, and
an order to close the long position at 109 limit. TS
will assume that the market opened at 102, then
reached the low at 100, which caused your buy order to
be filled. Then went to the high, which reached your
sell limit order closing your position.
If in reality the market went up to 110 first and then
made the low, you would have ended the bar with an
open position.
That was just because of the bar assumptions. We have
not talked about bouncing ticks yet in the example.
If you have the same bar:
High 110
Close 108
Open 102
Low 100
And assume you have a buy stop order at 105, a sell at
104 stop (stop loss) and a sell 107 limit (profit
taking).
TS assumes the market opens at 102, then reaches the
low at 100, then goes up and reaches 105, where your
buy order is filled. TS will then 'bounce the tick'
10% down (the direction of the market was up) and will
fill the stop loss order instead of continuing up and
filling your profit exit.
The idea is to try to introduce a 'wrinkle' into the
intra-bar price movement assumption. And it will only
affect you if you have 2 or more limit/stop orders in
the same bar which are placed very close to each other
(10% of the bar range for the ts default).
And personally, if you have two stop/limit orders
placed that close to each other (in reagards to the
bar's range), I would dare say you need to use a lower
data compression to make your analysis.
Victor
--- Glen Wallace <gcwallace@xxxxxxxx> wrote:
> I don't use TradeStation, but I'm analyzing the
> results of a system tested by
> TradeStation using daily data. The system enters at
> the open or on a limit
> order and exits at the close. Would the results be
> tarnished by the "bouncing
> tick" issue? Would someone please explain the
> bouncing tick issue?
>
> Thanks.
>
=====
Victor C.
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