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Introduction to Intraday ETF Data

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:

  • Resistance and support levels are key technical indicators helping traders predict changes in price direction. However, if end-of-day data is used a maximum of one test of a support or resistance level per day can be observed whereas in reality the level may have been tested several times. Since resistance/support levels are reinforced with multiple failed tests, it is vital to examine the intraday to determine the strength of the level.

 

  • Intraday day can give information on the strength of a day’s price movement. Using end-of-day data, an analyst may conclude that a large price movement accompanied by high volume is indicative of a broad-based demand for an ETF. However, this may not be borne out by the intraday data which could show either a persistent uptrend on buying or a downward movement on high volume which was merely reversed by some late trades before the close on low volumes.

 

  • Intraday data can help determine the types of investors participating in a daily price move. For this type of analysis, reference should be made to tick data (comprising every individual trade) and not the intraday bars of trades aggregated over a time-period such as one-minute.
    In general participation of large institutional funds will be essential to ensuring a long-term price appreciation of an ETF. From reviewing the tick data, large volume individual trades throughout the day on price upticks (indicating a buy order being executed) will be strongly indicative of buying by large institutions. By contrast, small volume trades are typically executed by retail investors.

 

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.

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