Notes on session breaks/continuity of the FX market

Questions about MCFX and MCFX Data Feed.
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terminal7
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Notes on session breaks/continuity of the FX market

Postby terminal7 » 13 Apr 2007

Thought some of the traders concerned with the problem of session break handling might find the following discussion interesting... These are excerpts from a discussion between a trading friend of mine in England and myself. Feel free to add lib anywhere you like. I will add to this as the discussion progresses. I post this for informational purposes only. This isn't a request for help from TSsupport on this problem as it is clear that our charting provider is unwilling to deal with it...
am a little puzzled by the SBC's, if I take this to mean that like the stock market, SBC's indicate the end of the trading period, then how would this occur in the Forex market that trades world wide on a 24/7 basis.
FX trades 24/7 but the custom among charting providers is still to recognize the session break, which means that, with reference to the way the data is displayed, FX is no different from the stock market. Candles are broken at the 24 hour mark according to the NY close so that datawise FX is not a continuous market. This situation prevails because those in the business of data display and charting insist on recognizing the session break. This corrupts the whole process of candle generation and distorts the market picture.

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terminal7
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Postby terminal7 » 19 Apr 2007

I can't relate the ratios you give below except for the 1:3 which is I think comes from three 8 hour sessions...
the current practice of breaking candles after 24 hours would result in a broken candle ratio of 1:3 (1 out of every 3 candles is broken) in a 10 hour chart, the 168 hour threshold would lower that ratio to 1:17.
The 1:17 comes from assuming a 168 hour session and a 10 hour chart. Dividing the chart Resolution (in this case 10) by the Session Length gives you the broken candle ratio. For a 168 hour session the ratio is 16.8. For a 24 hour session it is 2.4. If you further divide 16.8 by 2.4 you'll see that a 24 hour session yields 7 times as many broken candles as a 168 hour session would.

I'm still fighting to get TSSupport to comment on this solution to drastically cut the number of truncated candles in their charts. So far nothing. It seems they are in their foxholes and have no intention of coming out anytime soon. I doubt that the idea has even been passed on to the development team for consideration.

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terminal7
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Postby terminal7 » 19 Apr 2007

I would think that of all the worlds traders most either would not understand what you are talking about, and care even less. After all over 99% use time based charts as they are...
This is sad, but true. However, it doesn't change the fact that the charts they use are distorted by this problem. The only reason they don't care is because they don't KNOW and they are accustomed to looking at the distortion. The distortion becomes the real picture, the lie the truth. And no one can see the truth because they believe they already have it. It is impossible to determine in what ways fixing this problem would benefit average traders - a more compact chart is the most obvious but there may be other benefits unknown at this point. For example, how this problem affects the performance of indicators is currently unknown.
The fact that only a minority of traders seem to be concerned about this issue is, in my opinion, no justification for dismissing it. TSsupport should be interested in improving their product and providing their clients with a more accurate picture of the market regardless of how many people complain about the present state of affairs. That's good business because it's forward thinking, it's progressive, and it results in a truly better product. If TSsupport is in the habit of using a "complaint meter" to initiate innovative changes, then clearly there are many smart changes that will never be made. This is because only a minority of traders ever subject the market to the studious rigor that it deserves. The majority follow the bandwagon and innovation rarely blooms from this group.

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terminal7
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Postby terminal7 » 20 Apr 2007

The following is not part of the discussion but is included here for the benefit of forum readers:

Here's a graphic example of the distortion and inflation that occurs in charts containing an excessive number of broken candles. The solution we recommend (see A SOLUTION TO BROKEN CANDLES IN TIME BASED CHARTS) would lower the number of broken candles to such an extent that artificial inflation and event distortion would be kept to a minimum thereby increasing the fidelity of the charts.
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