Tick Data

Tick data or tick-by-tick data refers to databases of every tick transaction for different types of assets, like stocks, foreign exchange (forex), and more. A trader can develop models for improved short timeframe setups and day trading strategies with the help of such data.

Understanding the granular, high-frequency data is vital to conducting market microstructure analysis. It provides people with a clear idea regarding a certain asset or market’s dynamics. Moreover, accurately represents the market conditions, enabling traders to understand in which direction prices are heading. Overall, using this data, individuals can analyze momentum, order flow, and liquidity to make better trading decisions.

• Tick data refers to pricing data that consists of details concerning every bid and ask. The data also includes information related to the associated timestamp. The data helps traders carry out an analysis of the market and make prudent trading decisions based on the data.
• There are different sources of such data, for example, trading platforms and data providers.
• The different kinds of irregularities in stock or forex tick data can include outliers, gaps, and zero or negative price or volume. 

Tick data refers to real-time price and transaction records in financial markets. The data is comprehensive and high-frequency information, which allows for making more informed and faster decisions regarding when to purchase and sell. It serves as an effective tool for brokers, analysts, and market makers. That said, the data must be clean. If it is corrupt, one cannot get meaningful information.

This type of data can help traders become successful as it can offer more accurate analysis compared to conventional charts. Moreover, it can draw traders’ attention to a market’s emerging trends. When using other techniques or analysis, noticing such trends may not be possible. With the help of cutting-edge technology, for example, tick datasets offered by any specialist broker, even individual traders not having a substantial amount of capital can reap the benefits provided by such a tool. Such benefits can include better decision-making and risk management.

Generally, this type of data can include —

• Any modified order added to the order book along with that order’s quantity and price
• A canceled order
• Any fully or partially executed order 
• A newly accepted order that is a part of the order book

One must also note that there are different sources of such data, for example, trading platforms, brokers, and data providers. Trading platforms and data providers give this type of real-time data to traders, which they can utilize in trading strategies. Note that brokers can also offer tick-by-tick data, which is usually available via their trading platforms.

Let us look at a few tick data examples to understand the concept better.

Example #1

Suppose Sam is a trader with more than 4 years of experience in trading. He buys securities in the market to generate short-term financial gains. In this regard, tick data analysis has been quite useful for him as the information in the data helps him understand the most recent price changes. Moreover, it provides a granular view of the market activity. This, in turn, helps him identify opportunities in the market and make prudent trading decisions that generate significant returns in a short duration.

Example #2

Headquartered in London, United Kingdom, BMLL Technologies provides Level 3 historical tick data along with analytics for various advanced participants in capital markets. The analysis of their Level 3 data can help individuals and organizations in the following ways:

• It can help understand the markets in a more sophisticated manner.
• The analysis can safeguard users against any adverse selection.
• The data allows people to gain an improved understanding of a trade’s real cost in fragmented markets.
• It helps observe interactions taking place between order books.

This firm empowers researchers across international financial services to comprehend how a market behaves and forecast securities’ future price movements.

Individuals must remember that irregularities in this type of data can be of the following types:

• Gaps: The recording of ticks may not occur if trades continue purchasing at the asking price and selling at the bid price. In this case, the price bounces between two points.
• Detached Records/Outliers: In some cases, one may find outliers owing to sudden price decreases or increases. Removing such entries is impractical because the records may offer an improved understanding of the market’s structure. Moreover, they could be valid. Remember that in any decent organization, such data removes the invalid outliers.
• Negative Or Zero Price Or Volume: Ticks having negative or zero prices are errors that can be removed.
• Multiple Timestamps Having Identical Observations: In some cases, organizations offer this type of data for a low price. However, they add their timestamps to stale security prices, making them appear more frequent. This leads to the generation of more ticks with infrequent price alterations. One can easily notice if they plot historical tick-by-tick data on the security’s price chart.
• Multiple Observations With Identical Timestamps: This refers to more than one tick with identical timestamps. For example, the EURUSD currency pair may have various ticks with the exact timestamp.

One can understand the importance of stock or forex tick data by going through the points below:

• As noted above, such data can assist individuals in identifying opportunities in a market and formulating strategies accordingly.
• The data can help traders understand a certain asset’s liquidity.
• Traders can conduct tick data analysis to determine if an asset is worth the investment.
• This data provides traders with information concerning price movements and trend reversals.
• Various algorithmic trading strategies involve using tick data to identify exit and entry points, optimize trading strategies, and manage risk.
• Such data allows individuals and organizations engaging in high-frequency trading to capture micro-price alterations and make quick decisions accordingly.
• The data can help traders spot arbitrage opportunities.

The concepts of tick, bar, and minute data can be confusing for individuals new to the world of finance. However, one can know their meaning and purpose by finding out about their distinct characteristics.

This article has been a guide to what is Tick Data. Here, we compare it with bar data and minute data, & explain its examples, irregularities, and importance. You may also find some useful articles here –

• Tick Size
• Ticker Symbol
• Uptick Rule