Most of us are probably aware that candle patterns can look very different on different time frames; for example a bull trend on a 5 minute chart may show up as a bear trend on a minute chart or vice versa.
However, it is also possible that candle patterns may look very different on the same time frame if the data is slightly offset.
For example, if your five minute patterns are on the 0-5/5-10/10-15 etc minute bars, they may tell a very different story than those on the 2-7/7-12/12-17 etc bars.
I discovered this by accident (though it is obvious with a moment’s thought) when backtesting a strategy based on five minute bars, because the five minute bars of my program did not match the 5 minute bars of my broker package (in this case IG).
Now this may not matter too much in practice, as at the tick level the market is the market, but if you are basing trading decisions on the actual bars, to me there might be a problem.
For example, some strategies (one by Al Brooks happens to be the one I am testing) suggest putting an entry order just above the top of the previous bar, with a stop just below the previous bar in certain circumstances. However, these values might be very different if the bars are offset by a minute or even by just a few seconds. Moreover, he seems to suggest that there it is very important to wait for the end of the bar, as, for example, a bull bar may turn into a bear bar in the last few seconds of the bar.
While I agree that may well be the case, does it make sense to base your stop and entry points so formally on something that might change again within a few seconds? I know you have to put your stops and entries somewhere, but this seems to make it sound less arbitrary than it actually is.
As a further point, presumably different brokers, may have slightly different cutoffs for their various bars (IG five minute bars seem to be around the 00/05/10 minute marks, but by no means exact) so this too would also affect your strategy.
Anyway, I just wondered if anyone else had thought about this, or if I am missing something.
However, it is also possible that candle patterns may look very different on the same time frame if the data is slightly offset.
For example, if your five minute patterns are on the 0-5/5-10/10-15 etc minute bars, they may tell a very different story than those on the 2-7/7-12/12-17 etc bars.
I discovered this by accident (though it is obvious with a moment’s thought) when backtesting a strategy based on five minute bars, because the five minute bars of my program did not match the 5 minute bars of my broker package (in this case IG).
Now this may not matter too much in practice, as at the tick level the market is the market, but if you are basing trading decisions on the actual bars, to me there might be a problem.
For example, some strategies (one by Al Brooks happens to be the one I am testing) suggest putting an entry order just above the top of the previous bar, with a stop just below the previous bar in certain circumstances. However, these values might be very different if the bars are offset by a minute or even by just a few seconds. Moreover, he seems to suggest that there it is very important to wait for the end of the bar, as, for example, a bull bar may turn into a bear bar in the last few seconds of the bar.
While I agree that may well be the case, does it make sense to base your stop and entry points so formally on something that might change again within a few seconds? I know you have to put your stops and entries somewhere, but this seems to make it sound less arbitrary than it actually is.
As a further point, presumably different brokers, may have slightly different cutoffs for their various bars (IG five minute bars seem to be around the 00/05/10 minute marks, but by no means exact) so this too would also affect your strategy.
Anyway, I just wondered if anyone else had thought about this, or if I am missing something.
