Intra-bar Fluctuations
January 9, 2008 • Systems Trading Blog
An area so often ignored in intra-day strategy development is the movement of the market intra-bar. By intra-bar movement, I’m referring to the exact path that the rate takes from the open to the close. Was the high hit first, or was the low hit first? There is a subtle difference there that can make a world of difference to the outcome of your strategy.
A surprisingly large number of back-testing charting packages ignore this, resulting in a surprisingly large number of strategy developers not knowing about it. Many strategy development packages simply approximate the movement, which may differ greatly from the actual movement especially with longer time-frames such as daily and weekly. It will obviously not effect every strategy (especially longer term ones), but it is definitely something that should be taken note of and if you don’t see a way to take it into account, be wary of the results you are seeing in your back-tests. They may be worth little more than the paper you’re printing them on.
