Intraday Time Transformation with Tick-Weighted Bars and Indicators
Summary
The article examines how trading activity varies across intraday sessions and argues that fixed-time bars can make indicator observations statistically uneven. It proposes operational time, measured by a fixed number of ticks per bar, as a way to normalize observations. Since the described MetaTrader version lacks that bar option, it demonstrates alternatives: estimating the historical average tick volume for each hour, dividing actual volume by its expected level, and weighting a moving average by bar tick counts so its period is expressed in ticks rather than clock bars.
The evidence described comes from hourly tick-volume comparisons across currency pairs, including checks using observations separated by weekdays. The resulting profiles show recurring session activity peaks and support the claim that intraday activity is not uniform. The author notes that price averages are unstable, news can disrupt homogeneity, and the weighted average is computationally expensive and only approximates tick-level weighting. The discussion is about intraday methods and does not establish profitability for a trading strategy.
Key ideas
- Intraday market activity varies by session, so fixed-time bars may not represent comparable amounts of trading activity.
- Operational time can be approximated by forming bars from a fixed number of ticks.
- Historical hourly tick volume can provide an expected activity baseline for comparing current volume.
- A moving average can be adjusted to weight bar observations by tick volume and define its period in ticks.
- News and other scheduled events can disrupt the statistical homogeneity that time transformation aims to improve.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.