One misconception about tick data is that it is a tool for backtesting trading strategies. However, it’s not a useful tool for testing price movement in any direction. This data covers many strategies, whether they are intraday or daily trading.
In this post, you will get a deep insight into tick data. Let’s read out: What is Tick data?
Tick data is a proper database of the traded assets’ minimum upward and downward price movement on any exchange or platform. It helps traders to get detailed information on completed trades in the past.
Downloading tick data in MetaTrader 4 is an essential part of the backtesting trading strategy by investors, banks, and other major financial institutions. Price quotes on the right side are always blank pieces of paper. The Trader will look forward towards the left for demand and supply patterns as they are valuable for future predictions.
What Is Tick In Trading
The term Tick has two meanings in trading. It is the price difference between the current market price and the last quoted market price. For example, if the last quoted price was 1.32610 and the current price is 1.32613, the difference of 3 in price will be a tick. In trading, the tick measures the price movement in currencies or securities.
In stock, the trading tick has a different meaning. It stands for transaction between buyer and seller at the quoted price. It also stands for change in price from the first trade to the next trade-in, given the time frame. The minimum tick on stock trading with a $1 deposit is one cent approx.
What Is Tick Size In Trading
Tick size is defined as the price difference between the bid and offer price of an asset or currency pair traded on any particular exchange. It is the minimum price difference between the first and last trades in consecutive trades.
For example, if a stock has a tick size of Rs 0.02 and if the last traded price (LTP) was Rs 100, then the following five bid prices for this stock would be Rs 99.98, Rs 99.96, Rs 99.94, Rs 99.92, and Rs 99.90. In this case, the bid price cannot be Rs 99.87, as it does not match the tick size of Rs 0.02.
What Is Tick Data In Forex
In forex, tick data represents data of each tick transaction in terms of currency pairs. Through tick data, traders can manage ongoing strategies in a shorter time frame, especially for day trading. If you want to trade on tick data, experts would never recommend it. The reason is that the forex tick chart is hard to understand; it is full of weird noise and loses in rows.
The trade-in tick chart occurs in a concise timeframe. However, you can find forex tick data in both Metrateder 4 and 5 platforms. Many indicators rely on this tick data.
How To Download Tick Data on Mt4
Tick data is an important part of the Mt4 platform. You can download this data easily if you want to backtest your trading strategy. Let’s check out the steps to download this data:
Step-1 Go to Tools
Step-2 From Tools, go to History Centre.
Step-3 From History Centre Find out the pair you want to see the tick data.
Step-4 After choosing the currency pair, you can check the click data weekly, monthly in a 4-hour time frame, 1hr time frame, 30 mint timeframe, 15-minute time frame, and 5mint time frame
Step-5 You can see the Download below the right side under the currency pairs. Click on download, and tick data will start downloading.
Note: The downloaded tick data of each broker is different
You can save this data to excel or other programs you want
Pros Of Tick Data
Traders can select and change any number of ticks from tick data depending on trading strategy. Below are a few most common advantages of tick data in trading:
- Tick data help traders to get a better insight into price movement
- With valuable inputs on traded volume and price of assets, traders can manage the risk and profit ratio
- Tick data can spot trends, resistance, and support levels while trading.
- Tick data also provide information about price direction, momentum, and any reversal through tick chart
- Tick data tells you the history of your open and close positions along with the respective volume of the traded asset
Cons Of Tick Data
There are some drawbacks of tick data as well. So relying only on tick data for building a trading strategy is not the solution. Let’s see the cons of tick data in Trading.
- Only a few brokers provide this data, not all.
- Tick data of every broker is different.
- Tick data is composed of numbers of completed trades only, so you can see a lot of missing data and differences in transactions.
What is the tick used for?
The tick notes the slightest price movement of traded assets, currency, bond stock, or options in trading. It records all completed trades with low, high, open, and close positions concerning volume.
How do you trade using tick data?
It is possible though risky to trade using tick data through a tick chart. In order to trade through the tick chart, traders follow a short-term time frame, especially below 15mint. The bars on the tick charts are re-plotted by numbers. For example, if we open a 200-tick chart, each bar will measure 200 trades per bar. In order to trade through this data, you need to set your own setting. You can also prefer Fibonacci numbers to set your chart. There is no best number to trade with; you will have tgo backtest different settings.
Who uses tick data?
It is commonly used by the world’s largest investment banks, asset managers, proprietary traders, and institutions. The traders here use it for backtesting trading strategies for short-term intraday trading.
In a nutshell, knowing the concept of tick data is ideal for both beginner and professional traders. However, the traders who get the most benefit from it are intraday traders who want to trade on a short-term basis.
If you’re new to the trading world, in-depth knowledge of this database will help you to improve your trading techniques and style.