ETFs are rapidly supplanting indices as the key barometers of market sentiment and aggregate price levels. The key advantages of using intraday ETF data for market price analysis versus indices are firstly that ETFs are directly tradable (whereas indices need to be trading by using futures, options or contracts-for-difference – all of which have tracking errors against the index).
End-of-day data is very convenient and easy to store and analyse, however, using high-resolution intraday data has several benefits:
Types of Intraday ETF Data
Broadly there are two types of intraday data – tick data and intraday bars.
Tick data is every trade for a given ETF comprising timestamp, price, volume (and maybe the exchange the trade occurred on).
Intraday bars are trades aggregated over a time-period (such as 1-minute) and comprise timestamp, open, high, low and close – as such intraday bars resemble end-of-day data.
The resolution of the data for using in analysis is often a point of confusion for new users. In general the resolution of the data should correspond to the expected holding period. For long term investors expecting to hold an ETF for a year of more, one-hour bars will be sufficient. For shorter term investors the general rule is there should be at least twenty datapoints during the expected holding period. So if an investor was expecting to hold a stock for a two days then a resolution of 30-minutes should be sufficient as there would be approximately 25 bars over the two-day period. By contrast a trader looking to hold the ETF for only three hours would require using 5-minute bars.