Activity based interval for intra-day chart
A concern I’ve always had with the traditional charts is that the idea of open and close for each bar doesn’t have much meaning on intra-day charts. In daily chart, open and close represents prices for the session, which gapped for hours overnight. But on intra-day chart, say in a 5-minute chart, each bar’s open and close are merely what just happens to be the price at the beginning and end of that 5 minute period.
The problem though, is that many technical analysis uses only the closing price, which is entirely arbitrary and has no significance. A better way would be to use a volume weighted median price in the period to represent the real “activity.” However, there doesn’t seem to be an easy way of getting that data in TradeStation (TS).
Fortunately, I found out that charting in TS is not limited to time based data. Prices can be charted based on an activity interval too. A bar can represent, say, 100 ticks or 100 contracts. So the interval of the bar can have a real meaning. Below is a 100 contracts/bar chart of ZGG08 from this morning. Compare with the 4 min. chart below it. The 100 chart is less erratic.
More testing will be done using activity interval tomorrow.
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