Margin Debt
• Implied Volatility (VIX)
The majority of charts are simple price-time charts, using the basic open, high, low, and close information, popularly referred to as OHLC data. Let us now turn our attention to how OHLC data is created.
Quantization of Price
In order to create OHLC data, we first need to specify the time interval over which price activity occurs. For example, let us assume that we are interested in identifying the opening, high, low, and closing prices over five-minute intervals. We therefore need to separate or quantize price activity with respect to time, for each successive 5-min interval, or period. An interval or period may be of any duration, but the most popular intervals are 1-min, 5-min, 15-min, 1-hour, 4-hour, daily, weekly, monthly, and yearly. In our example, the price at the beginning and end of any 5-min interval represents the Opening (O) and Closing (C) price respectively, while the highest and lowest price within that period represents the High (H) and Low (L) prices. In most cases, the closing price will also represent the opening price of the next 5-min interval, unless there is a gap in price. Figure 3.1 depicts price activity within a 5-min period. Price is quantized into 5-min intervals and is summarized into four pieces of information, namely the OHLC data. Note that OHLC data is also used to construct other representations of price activity like bar charts, Gann bars, and Japanese candlesticks.
Figure 3.1 Filtering Price Action into Four Pieces of Information (OHLC).
The range of a bar or candlestick is simply the absolute difference between the high and low price, that is, range = |H – L |.
Refer to Figure 3.2. To create OHLC data for bars and candlesticks over longer periods, simply identify the:
1. Opening price of the first period (O)
2. Closing price of the last period (C)
3. Highest price between the opening and closing price (H)
4. Lowest price between the opening and closing price (L)
Figure 3.2 Higher Timeframe Price Action Represented by Composite/Combination Bars (OHLC).
We observe the creation of a 15-minute bar and candlestick in Figure 3.2 via such a process. This method may be used over any duration to create bars and candlesticks of longer or multiple periods, normally referred to as higher timeframe bars and candlesticks. Hence, a 15-minute bar represents a bar that is associated with a higher timeframe, unlike 5- or 10-minute bars.
Figure 3.3 shows a series of OHLC based bars and its equivalent candlesticks being formed by the quantization of price into 5-minute intervals or periods.
Figure 3.3 The Quantization (Filtering) of Price Action.
OHLC data is therefore simply a summary of price activity within a certain interval or period. The longer the duration of the interval or period of the resulting OHLC data, the higher will be the timeframe associated with such bars and candlesticks. As can be seen in Figure 3.4, most charts are created from basic OHLC data, with the exception of the equivolume chart, which requires additional information on volume in order to construct its bars. In short, equivolume bars require OHLCV data, with V representing volume.
Конец ознакомительного фрагмента.
Текст предоставлен ООО «ЛитРес».
Прочитайте эту книгу целиком, купив полную легальную версию на ЛитРес.
Безопасно оплатить книгу можно банковской картой Visa, MasterCard, Maestro, со счета мобильного телефона, с платежного терминала, в салоне МТС или Связной, через PayPal, WebMoney, Яндекс.Деньги, QIWI Кошелек, бонусными картами или другим удобным Вам способом.
