Overview
The smallest time unit between changes in the price of any currency pair is called a sin-gle tick, and a sequence of consecutive ticks is referred to as streaming data. During pe-riods of heavy trading, there may be as many as three hundred ticks in a single minute.Conversely, during periods of low trading (such as in certain minor currency pairs overthe weekend), several hours can elapse between individual ticks.
Tick data does not have an open, high, low, or close quote—it simply tells the pre-vailing price. The OHLC quotes occur only after tick data has been collected and co-erced into interval data, such as one minute, one hour, one day, or any other selectedduration.
By definition, interval data is represented along the x-axis as equally spaced time seg-ments. By contrast, tick data almost always distorts the representation of time along thex-axis, although it does remain continuous. Between January 1, 2000 and December 31,2005, the number of ticks in a single minute in the EURUSD currency pair ranged fromzero to three hundred. These variations produce an accordion effect on the x-axis.
In the tick chart of the euro/U.S. dollar currency pair shown in Figure 1.1, a continu-ous line represents the price, while the time scale at the bottom of the chart fluctuatesby the number of ticks per time interval. This is the sole criterion that distinguishes tickcharts from other line charts. The chart clearly shows a variation in the number of ticksper minute as time progresses.
The smallest time unit between changes in the price of any currency pair is called a sin-gle tick, and a sequence of consecutive ticks is referred to as streaming data. During pe-riods of heavy trading, there may be as many as three hundred ticks in a single minute.Conversely, during periods of low trading (such as in certain minor currency pairs overthe weekend), several hours can elapse between individual ticks.
Tick data does not have an open, high, low, or close quote—it simply tells the pre-vailing price. The OHLC quotes occur only after tick data has been collected and co-erced into interval data, such as one minute, one hour, one day, or any other selectedduration.
Tick Chart
By definition, interval data is represented along the x-axis as equally spaced time seg-ments. By contrast, tick data almost always distorts the representation of time along thex-axis, although it does remain continuous. Between January 1, 2000 and December 31,2005, the number of ticks in a single minute in the EURUSD currency pair ranged fromzero to three hundred. These variations produce an accordion effect on the x-axis.
In the tick chart of the euro/U.S. dollar currency pair shown in Figure 1.1, a continu-ous line represents the price, while the time scale at the bottom of the chart fluctuatesby the number of ticks per time interval. This is the sole criterion that distinguishes tickcharts from other line charts. The chart clearly shows a variation in the number of ticksper minute as time progresses.
See chart above
Spread Chart
Nearly all financial vehicles can be plotted as some form of a spread chart based onsome unique properties of the underlying instrument. In futures markets, a spreadchart usually implies the comparison of a forward expiry month with a distant ex-piry month in the same commodity. Within spot currency markets, a spread chart is defined specifically as the difference between the bid price and the ask price,which currency dealers use as the transaction cost for a round-turn trade in that cur-rency pair.
The ask price is the price that the trader pays when entering the market in a longposition; the bid price is used when the trader enters the market short.
The currency spread chart is plotted as a channel chart in which the upper bound-ary is the bid price and the lower boundary is the ask price. (See Figure 1.2.)
The importance of the spread chart is that it is the most common method used todisplay streaming data in online trading platforms. The trader can readily see the buyingprice (the lower boundary) and the selling price (the upper boundary).
Conclusion
Understanding the nature of spot currency data in its most primitive form (raw stream-ing tick data) is requisite knowledge for all traders.
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