How Simulated Tick Backtests Reconstruct Prices from OHLC Bars
Summary
This explanation contrasts simulated tick-level backtests with live-data backtests. The platform described runs strategies through a repeatedly polled control flow and presents API data as if it arrived during operation. In simulated mode, it interpolates ticker observations from each underlying bar’s open, high, low, and close values. In live mode, it uses recorded ticker data, which the document says is closer to reality for strategies driven by tick data.
The underlying bar interval must be shorter than the interval of bars requested by the strategy; otherwise, too few simulated ticks may distort the requested data. The document describes an MT4-like reconstruction algorithm that places one or more prices within each bar based on its OHLC pattern, distributes volume, and ends with the bar’s close. Because these ticks are inferred rather than observed, simulated sequences can contain price jumps and cannot reproduce the actual path of intrabar prices. Results for high-frequency or tick-sensitive strategies therefore depend on the interpolation assumptions and underlying bar resolution.
Key ideas
- The described simulator builds ticker sequences from OHLCV bars rather than using observed ticks.
- Live-tick backtests use recorded prices and are presented as more realistic for tick-driven strategies.
- The underlying bar interval should be shorter than the interval of bars requested by the strategy.
- The reconstruction rules place simulated ticks within a bar according to its OHLC configuration and volume.
- Interpolated intrabar paths can differ from market reality and may produce price jumps.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.