Please bear with me as I wade through the following (Iâm not claiming anything original here; just pulling together elements proposed by other contributors in other threads to see if it all holds together) ...
1) Each of us uses a different trading computer.
2) Each trading computer constructs bars from the ticks that arrive at that computer, referenced against that computerâs internal clock. When the computer judges each barâs time period has passed, it âclosesâ that bar (which determines that barâs OHLC), and begins to count subsequent ticks towards the next bar.
3) As A) we all likely have our computersâ internal clocks synchronized slightly differently, and B) we each have our trading computer located a different âInternet distanceâ from our source of tick data, and C) we each source our tick data from a variety of combinations of sources anyway (e.g. from brokers, from eSignal, from exchanges, etc.)...
... the precise combination of TICKS and WHEN THEY ARRIVE (as referenced by each computerâs internal clock) is going to be unique to each one of us.
Therefore the precise combination of OHLCs across all the bars in a given real-time chart is also going to be different for each one of us (with bar Open and Close perhaps the most volatile elements). WE WILL EACH SEE A DIFFERENT REAL-TIME CHART; EVEN FOR THE SAME INSTRUMENT AND TIME INTERVAL.
So where does this lead? (And thanks for bothering to read this far... nearly there!)
In designing a mechanical intraday trading strategy, one could make use of entry (or exit) signals sensitive to specific sequences of intraday bar-to-bar OHLC measurements (e.g. âafter a lower low followed by three successive higher closes, go longâ ... or more subtly, âafter MACD diff crosses above 0, go longâ ... or âafter 12-period momentum goes below 0, exit positionâ ... etc).
However, given that the real-time OHLC sequences perceived by each of us are going to be subject to our specific situation (computer clock, âinternet distanceâ, and data source, and perhaps other elements, too), WE WONâT BE ABLE TO DRAW ANY MEANINGFUL CONCLUSIONS ABOUT THE VALIDITY OF OUR STRATEGY THROUGH BACKTESTING (OR FOWARDTESTING) UNLESS WE ARE ABLE TO KEEP ALL ELEMENTS OF OUR SPECIFIC SITUATION THE SAME FOR BOTH âLIVEâ TRADING AND TESTING.
Also, even though a strategy including these subjective OHLC sensitive entry/exit signals might work for one trader in their specific situation, exactly the same strategy might well not be portable to another trader (if they have clock synced differently, are in a different location, and use a different data source) or even to another computer.
This would suggest perhaps that SUCH OHLC SENSITIVE ENTRY/EXIT SIGNALS SHOULD BE AVOIDED, AS THE STRATEGIES THEY DEFINE WILL NOT PERFORM STABLY ACROSS A VARIETY OF "SITUATIONAL CONDITIONS" (!).
Superior entry/exit signals (that have a more objective/absolute character from an intraday perspective) can instead be looked for among the likes of, for example, daily pivots (as these depend on daily - not intraday - HLC, which there can be much less argument about, and so all traders see the same), or fading extreme moves of ^TICK, etc.
Any thoughts? Comments?
1) Each of us uses a different trading computer.
2) Each trading computer constructs bars from the ticks that arrive at that computer, referenced against that computerâs internal clock. When the computer judges each barâs time period has passed, it âclosesâ that bar (which determines that barâs OHLC), and begins to count subsequent ticks towards the next bar.
3) As A) we all likely have our computersâ internal clocks synchronized slightly differently, and B) we each have our trading computer located a different âInternet distanceâ from our source of tick data, and C) we each source our tick data from a variety of combinations of sources anyway (e.g. from brokers, from eSignal, from exchanges, etc.)...
... the precise combination of TICKS and WHEN THEY ARRIVE (as referenced by each computerâs internal clock) is going to be unique to each one of us.
Therefore the precise combination of OHLCs across all the bars in a given real-time chart is also going to be different for each one of us (with bar Open and Close perhaps the most volatile elements). WE WILL EACH SEE A DIFFERENT REAL-TIME CHART; EVEN FOR THE SAME INSTRUMENT AND TIME INTERVAL.
So where does this lead? (And thanks for bothering to read this far... nearly there!)
In designing a mechanical intraday trading strategy, one could make use of entry (or exit) signals sensitive to specific sequences of intraday bar-to-bar OHLC measurements (e.g. âafter a lower low followed by three successive higher closes, go longâ ... or more subtly, âafter MACD diff crosses above 0, go longâ ... or âafter 12-period momentum goes below 0, exit positionâ ... etc).
However, given that the real-time OHLC sequences perceived by each of us are going to be subject to our specific situation (computer clock, âinternet distanceâ, and data source, and perhaps other elements, too), WE WONâT BE ABLE TO DRAW ANY MEANINGFUL CONCLUSIONS ABOUT THE VALIDITY OF OUR STRATEGY THROUGH BACKTESTING (OR FOWARDTESTING) UNLESS WE ARE ABLE TO KEEP ALL ELEMENTS OF OUR SPECIFIC SITUATION THE SAME FOR BOTH âLIVEâ TRADING AND TESTING.
Also, even though a strategy including these subjective OHLC sensitive entry/exit signals might work for one trader in their specific situation, exactly the same strategy might well not be portable to another trader (if they have clock synced differently, are in a different location, and use a different data source) or even to another computer.
This would suggest perhaps that SUCH OHLC SENSITIVE ENTRY/EXIT SIGNALS SHOULD BE AVOIDED, AS THE STRATEGIES THEY DEFINE WILL NOT PERFORM STABLY ACROSS A VARIETY OF "SITUATIONAL CONDITIONS" (!).
Superior entry/exit signals (that have a more objective/absolute character from an intraday perspective) can instead be looked for among the likes of, for example, daily pivots (as these depend on daily - not intraday - HLC, which there can be much less argument about, and so all traders see the same), or fading extreme moves of ^TICK, etc.
Any thoughts? Comments?