The trading behavior of a strategy is determined by bars or by ticks - in most cases by both. A bar is usually a fixed time period, like one minute or one day. In the chart below, of the EUR/USD price curve in summer 2009, every bar is displayed with a red or green candle. The horizontal width of the candle is the bar period (in the chart below, one day), and its vertical height is the price movement of the asset during that period. On green candles the price went up during the bar period; on red candles it went down. By default, Zorro displays up and down candles in white and black colors. The thin lines above and below the candles - the 'wicks' - represent the highest and the lowest price during the bar period.
For example, when you look at the candle of June 1 (at the vertical line below marked Jun), you see that the day started at a price of 1.4125. During the day the price went as high as 1.4225, and as low as 1.4110. The day ended with the price at 1.4135.
In past times, a bar was really equal to a day. The closing price was the price of the asset in the afternoon when the market closed, and the opening price was the first price next morning at 9:30 after the traders had contemplated their strategies all night. In modern times, many assets are traded online 24 hours a day, and some, such as digital coins, even at weekends and holidays. Due to the trading around the clock, you can see that in the above chart the closing price of one bar is almost identical with the opening price of the next bar. This is different when an asset is traded at a single stock exchange and has little or no trading volume outside its business hours. In that case, daily candles can have a gap between the close of a bar and the open of the next bar.
It is often confusing to beginners that the price curve of the same asset can look very different on different trading platforms and charting programs. This happens especially with forex pairs or CFDs that are traded around the clock. The form of a candle - the relation of open, high, low, and close price - is determined by the time zone that the charting software uses, and by the open/close time of the bars. The EUR/USD chart above is based on Greenwich Mean Time (GMT, UTC). The same chart in New York local time (EST) would have very different looking candles. By the convention used by Zorro, times are normally displayed in UTC and the time stamp associated to a bar is the current time when the bar is complete. Thus, a 12:00 bar is the bar that closes at 12:00 UTC.
Trading can be based on ticks, bar periods, and time frames. In live trading, a tick is the arrival of a new price quote, which can happen many times per second. In the backtest, a tick is the smallest time unit of the historical price data, often 1 minute. The strategy script is run at the end of every bar period; it can also have a tick function that runs at every tick. Since ticks arrive rarely or not at all during weekends or holidays, and since Zorro allows bar periods down to a millisecond (for HFT simulation), bars can be much shorter than the distance between ticks. In such a case, the bar is normally extended by the multiple of the bar period until it contains at least one tick. Bars can be also extended for skipping weekends, holidays, or market closure. All this can be set up with BarMode flags. The bar duration is always a multiple of the bar period. The time stamp associated to a bar is the current time at the end of the bar (not the bar start time!). When one bar ends, the next bar starts; there is no 'gap' between bars, even though the market may be closed during a bar or a part of it.
A time frame can cover several bars, and is normally used as a time basis for technical indicators and price series. For instance, TimeFrame = 4 merges 4 bars to a single time frame, and TimeFrame = framesync(24) merges a varying number of hour bars to a full day. Bars be be merged by any criteria and time frames can be synchronized to certain hours or other events. A strategy has always one bar period, but can have multiple time frames. Indicators are normally based on the bar period, but can also be based on longer time frames.
Note that charts - by Zorro and by almost all other platforms - can be misleading about bar periods and indicators. A candle is usually printed centered at its bar time stamp (as in the chart above), not in front of it as would be correct. Indicators are usually printed with smooth lines, while they in reality have a discrete step at any candle. So the begin and end of bars and the crossings of indicators are normally slightly off in charts. For getting the real times of the bars or indicator crossing points, use not a magnifying glass on the chart, but look in the backtest log.
Normally, any bar constitutes a candle that is generated from the price quotes during the bar. Since many assets are traded in sessions and have no or infrequent price quotes outside market time, out-of-session bars can be either merged to a single candle, or completely ignored. For merging them to a single bar, the time frame mechanism can be used. For ignoring price quotes outside a trading session, time series can be declared as static and individually shifted and filled.
Some traders believe that they get a better insight into the market with bars that cover not a fixed time period, but a fixed price movement. With a focus on price movement, long periods of consolidation are condensed into just a few bars, thus highlighting "real" price trends. There are many special bar types: Tick Bars, Renko Bars, Range Bars, Momentum Bars, Point-and-Figure Bars, or Haiken Ashi Bars. Some market inefficiencies may be more clearly visible when getting rid of speed and time information. Zorro allows any imaginable combination of price and time for constructing user-defined bars with the bar function.
Strategy development involves testing the strategy with historical price data. The prices are read from files in Zorro's History folder. For keeping the files at a reasonable size, they normally do not contain all the price quotes, but only one-minute candles (M1 data) or daily candles (D1 data). Files containing no cancles, but direct price quotes (T1 data), can also be used for special purposes, like testing scalping or HFT strategies.
Historical M1 data for main currencies, indices, and commodities is available on the Zorro Download Page. Data that is not found there can be downloaded (usually free) from brokers or from Internet data providers (Google™, Quandl™, etc.). Data in high resolution or with special content - for instance, option chains - is normally not free. It can be purchased from data vendors; we also provide M1 price data and EOD options data for US stocks and ETFs in the Zorro data format. Other vendors specialize on certain data types or exchanges - for instance, iVolatility™ on options and futures, Nanotick™ on Chicago traded assets, or Nanex™ on New York traded assets. Most have data in CSV format that can be convert to Zorro's data formats using the dataParse function with a special format string. Examples for conversion scripts can be found in the Strategy folder.
Bars, candles, ticks, or quotes are often confused, and the meanings of those terms can also vary from platform to platform. Throughout this manual the following terms are used:
Asset - the traded financial product. Multiple synonyms are used in the trading literature, such as Instrument, Ticker, Symbol, Issue, Market, Security.
Quote - online offer by a market participant to sell or buy an asset at a certain price. The most recent price quote is the current bid or ask price of an asset. Sometimes other methods are used to define the current price, for instance the best recent quote or the last traded price.
Tick - a price with a time stamp. In live trading, a tick is generated by an incoming new price quote. In historical data files, a tick is a price sample with its associated time. If a tick is sampled together from several quotes, as in most historical data files, its time stamp is the time of its most recent quote.
Candle - price info covering a time interval with an open, close, high, and low price. T1 data contains only a single price quote per tick, so its open, close, high and low is the same price. Price ticks in historical files are usually candles with the first, last, highest, and lowest price of all quotes they are sampled from. The same asset can produce very different candles depending on price source and time zone. Forex or cryptocurrency candles from different brokers often differ strongly, candles of exchange traded assets differ less or not at all.
Bar - basic time interval. Determines the width of a chart candle, the time resolution of the price curve, and the execution interval of a trading strategy. The time scale on a chart is divided into bars that cover at least one tick, but normally many ticks. The bar time can vary from bar to bar when special bar types, such as Range, Renko, or Point-and-Figure bars, are used, or when bars are extended due to weekends, holidays, or market closure.
Intrabar - happening inside a bar. Simulating intrabar events in test/train mode requires the TICKS flag. The tick or tock functions or trade management functions can run at any time inside a bar.
Time frame - basic time unit of algorithms and indicators in a trading strategy. It is often identical to a bar, but can also cover multiple bars in multi-timeframe strategies. A time frame can be synchronized to a full hour, day, or week. In that case the number of bars per time frame can vary.
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