Choosing Time, Tick, Volume, Dollar, and Imbalance Bars
Summary
The article explains how OHLC bars can be built using different measures of market activity. Time bars group trades into fixed intervals, while tick bars form after a set number of transactions. The examples show that equal-length time bars can conceal differences in trading intensity, and that tick bars count transactions without reflecting differences in their sizes.
Volume bars form after a fixed quantity of shares trades; dollar bars form after a fixed traded value, which the article argues is more comparable across periods when share prices change. It also describes imbalance-based sampling, which creates bars more frequently when buying and selling activity diverges or other specified order patterns arise. The article asserts that dollar bars have more normally distributed returns than the alternatives, but supplies no supporting analysis or citations. Its examples are illustrative rather than a tested trading strategy; bar choice alone does not establish predictive value or account for execution costs.
Key ideas
- Time bars aggregate OHLC data over fixed intervals, regardless of how many trades occur.
- Tick bars reflect transaction counts but do not account for differences in trade size.
- Volume bars form after a fixed quantity trades, while dollar bars use a fixed traded value.
- Imbalance-based bars can sample market activity more frequently when buy and sell flows diverge.
- The article's statistical claim about dollar bars is not supported with evidence in the text.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.