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Data sources and uses

  #1 (permalink)
 
Small Dog's Avatar
 Small Dog 
Sydney NSW Australia
 
Experience: Intermediate
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I experienced a rude awakening today. Shocking rather. I was testing a strategy in TradeStation - spot Forex, sourced by them. I was pretty proud of myself. Until today. I transferred it to MultiCharts that is connected to Oanda and ran the strategy on couple of years' worth of data. To my shock the equity curve was very different from that in TS.

I am still to go through all the data, but I suspect the problem lies in the data sources. Obviously Oanda's feed is different from TradeStation.

The question is, how do I deal with this? How do you guys do it? Use TradeStation for data source and execute through Oanda? Use Oanda data to test and optimise? Use a third party reputable data vendor and execute through Oanda? Or move to a different broker alltogether?

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  #2 (permalink)
 kevinkdog   is a Vendor
 
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ursus View Post
I experienced a rude awakening today. Shocking rather. I was testing a strategy in TradeStation - spot Forex, sourced by them. I was pretty proud of myself. Until today. I transferred it to MultiCharts that is connected to Oanda and ran the strategy on couple of years' worth of data. To my shock the equity curve was very different from that in TS.

I am still to go through all the data, but I suspect the problem lies in the data sources. Obviously Oanda's feed is different from TradeStation.

The question is, how do I deal with this? How do you guys do it? Use TradeStation for data source and execute through Oanda? Use Oanda data to test and optimise? Use a third party reputable data vendor and execute through Oanda? Or move to a different broker alltogether?


I always recommend that you test and trade with the same data source. This holds for forex (your case) and futures (where different vendors rollover contracts at different times/dates).

In your case, you could have MultiCharts use Tradestation data, and just execute at Oanda. This would work OK if it was just market orders (meaning you send market orders to Oanda once the MultiCharts strategy records a fill). But if you are going to send active limit and stops to Oanda, those prices will be based on TS data, and will likely execute differently with Oanda prices.

Hope this helps.

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  #3 (permalink)
 
Small Dog's Avatar
 Small Dog 
Sydney NSW Australia
 
Experience: Intermediate
Platform: TradeStation, Oanda
Trading: Forex, index futures
Frequency: Daily
Duration: Days
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Thanks for the reply. Not sure how well it will work with this particular system, as it takes small frequent profits. Small- 10-15-20 pips. So if the Oanda data is off TS by a lot it may change the results. I guess I don't have much choice in this.

Thanks again. I am going g to run the strategy with small size to see how it goes.

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  #4 (permalink)
 Hemmo 
Newcastle, NSW, Australia
 
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Platform: MC, TS, SQX, Build Alpha
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In my experience, the actual real-time spot forex bid & ask prices can certainly vary between the CFD/FX providers. OANDA is not an ECN but perhaps TradeStation Global is? It can be quite surprising how those differences in spreads quickly add up, especially where you are trading for smaller gains of 10 to 20 pips per trade, and also if you are trading the forex pairs with larger spreads such as GBP/CAD, GBP/NZD, etc.

As to how you can deal with this, Iím with kevinkdog Ö look to use the same data source for historical data and your live trading, particularly for opaque OTC contracts such as FX and CFDs.

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  #5 (permalink)
 
Small Dog's Avatar
 Small Dog 
Sydney NSW Australia
 
Experience: Intermediate
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Trading: Forex, index futures
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Duration: Days
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I have been retesting lots of stuff on Oanda data, and it has been a interesting (and troubling) revelation. The data is indeed very different, the lower the time frame, the more different it is. I have an account with Saxo, going to check the discrepancy between TS and them as well.

Thanks to everyone for advices.

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  #6 (permalink)
 
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 bobwest 
Western Florida
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ursus View Post
I experienced a rude awakening today. Shocking rather. I was testing a strategy in TradeStation - spot Forex, sourced by them. I was pretty proud of myself. Until today. I transferred it to MultiCharts that is connected to Oanda and ran the strategy on couple of years' worth of data. To my shock the equity curve was very different from that in TS.

I am still to go through all the data, but I suspect the problem lies in the data sources. Obviously Oanda's feed is different from TradeStation.

The question is, how do I deal with this? How do you guys do it? Use TradeStation for data source and execute through Oanda? Use Oanda data to test and optimise? Use a third party reputable data vendor and execute through Oanda? Or move to a different broker alltogether?

This has been touched on already, but the fact is that there is no one "real" price in spot foreign exchange, because you are actually trading a market that is created by your broker, not a market that exists on a central exchange that all traders trade on. So prices may have a tendency to be somewhat similar between brokers, but there is no guarantee about how close they will be -- in fact, it is basically guaranteed that they will not be the same. There is actually no "third party reputable data vendor" that will solve the problem, because the issue is not that the data is different, it's that the markets you are trading are different.

The different markets are artificial because they are simply what is furnished by the individual brokers. There is an actual real spot FX market out there, but it is a huge thing between the large international banks. What you will find available to the retail trader is not going to be the same, and you can't participate in it. There will be a general relationship, but not an exact one.

There is also a true centralized market on the CME futures exchange. It won't be the same as any of the spot FX brokers either, but there may be more traders taking part and it isn't tied to one broker.

The possible solutions would be:

1. Just realize that you're not trading a common, shared, central market and live with it. In that case, it makes the most sense to backtest and execute with the same broker. You can't expect any two to always be the same.
2. Find another broker to trade with. But still use the data of the broker that you are going to execute with.
3. Trade the futures foreign exchange contracts, which may involve a different amount of capital, but which is standardized and does not vary with your broker.
4. Don't trader foreign exchange at all.

I think that this list is about all you can do. I hope you find one of these satisfactory to you.

Bob.

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-- Cervantes, Don Quixote
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  #7 (permalink)
 
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 AllSeeker 
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Even central banks will not provide same prices at the same time, which trade in numbers that are mind boggling, and even fraction increase or decrease can turn up to millions. There is also going to be problem with market timings, so bobwest is pretty much bang on the money, like usual.

Trade where you are testing. Just my opinion.

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  #8 (permalink)
 
Small Dog's Avatar
 Small Dog 
Sydney NSW Australia
 
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What it means is that it probably hard to trade intraday strategies on forex, especially those that take small profits. Trend following, longer term should be probably better - larger profit targets and stops, so not as dependent on execution.

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  #9 (permalink)
 
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 vmodus 
Somewhere, Delaware, USA
 
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bobwest View Post
This has been touched on already, but the fact is that there is no one "real" price in spot foreign exchange, because you are actually trading a market that is created by your broker, not a market that exists on a central exchange that all traders trade on. So prices may have a tendency to be somewhat similar between brokers, but there is no guarantee about how close they will be -- in fact, it is basically guaranteed that they will not be the same. There is actually no "third party reputable data vendor" that will solve the problem, because the issue is not that the data is different, it's that the markets you are trading are different.

The different markets are artificial because they are simply what is furnished by the individual brokers. There is an actual real spot FX market out there, but it is a huge thing between the large international banks. What you will find available to the retail trader is not going to be the same, and you can't participate in it. There will be a general relationship, but not an exact one.

There is also a true centralized market on the CME futures exchange. It won't be the same as any of the spot FX brokers either, but there may be more traders taking part and it isn't tied to one broker.

The possible solutions would be:

1. Just realize that you're not trading a common, shared, central market and live with it. In that case, it makes the most sense to backtest and execute with the same broker. You can't expect any two to always be the same.
2. Find another broker to trade with. But still use the data of the broker that you are going to execute with.
3. Trade the futures foreign exchange contracts, which may involve a different amount of capital, but which is standardized and does not vary with your broker.
4. Don't trader foreign exchange at all.

I think that this list is about all you can do. I hope you find one of these satisfactory to you.

Bob.

Thanks for articulating this so well, @bobwest!

~vmodus

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  #10 (permalink)
 
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 vmodus 
Somewhere, Delaware, USA
 
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ursus View Post
What it means is that it probably hard to trade intraday strategies on forex, especially those that take small profits. Trend following, longer term should be probably better - larger profit targets and stops, so not as dependent on execution.

I had the same exact problem, which is why I quickly abandoned TS forex development and testing and moved to using MultiCharts with OANDA. In the end, all my development, testing, and live trading was with OANDA and their dataset. This provided, to me, trading results that aligned with my backtests.

~vmodus

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