OHLC chart, is it graphed on bid prices, ask prices or executed trades?
I have a stream of bid/ask market data and a stream of executed trades.
Quick question, as not too sure how to best approach this. To draw an OHLC chart, would I:
a) Base calculation entirely on observed bid prices over a time period (highest bid, lowest bid, and last bid during that period)
b) Base calculation entirely on observed ask prices over a time period
c) Base the OHLC chart on executed trades at price x doing the time period?
I have also seen someone on a metatrader forum mention off the cuff that:
Open: (bid + ask) / 2
High: highest bid
Low: lowest offer
Close: (bid + ask) / 2
So wondering which of all these it is?
Best regards,
(4)4 Comments
Sorted by latest first Latest Oldest Best
I would think it would be based on executed trades. Otherwise there would be lows of [CO].01 for most stocks from someone putting in ridiculously low, unrealistic offers.
The question is very relevant for low volume trading. Whereas for high volume trading the trades as well as the spread between the bids and asks would be fairly close.
There are definitely mixed definitions for the terms Open, High, Low, and Closing used for OHLC charts. For instance, this source puts Open and Closing as trading prices, but High and Low as Ask prices (http://www.forex-charts-book.com/). But, for trading purposes, each of these terms have definitions, and they are each based on executed trades, not the order book (ie. not bids and asks).
"An OHLC chart is a type of bar chart that shows open, high, low, and closing prices for each period. (https://www.investopedia.com/terms/o/ohlcchart.asp)
Open Price Defined (https://www.investopedia.com/terms/o/openingprice.asp)
Closing Price Defined (https://www.investopedia.com/terms/c/closingprice.asp)
Closing Price Defined By The SEC (https://www.sec.gov/fast-answers/answerscloseprhtm.html)
Although closing in always open markets (such as cryptocurrency) will always be the opening price of the following period, in markets that close and allow specific trading while closed, there may be certain factors that bring a difference between a day's closing and the following day's opening. For instance (https://www.investopedia.com/ask/answers/139.asp) or for the CME (https://www.cmegroup.com/education/indicative-opening-price-overview.html)
Highest and Lowest Price Defined [Range] (https://www.investopedia.com/terms/r/range.asp)
I hope that helps out.
This is a good old question. However, in recent versions of Metatrader-5, they provide THIS description for calculating candle sticks, based on intra-timeframe ticks. Here is one of the diagrams they use to describe it. It should be noted that all "points" are Bid points.
Additional info can be found here.
The Open - is the first traded price for the period.
The High - is the highest traded price for the period.
The Low - is the lowest traded price for the period.
The Close - is the last traded price for the period.
Any existing Bid/Ask prices remaining in the market depth have not been traded yet so can not be used to produce charts. So point (c) is your answer.
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