Apiary Fund Blog

Trading and Misquotes

[fa icon="calendar"] Nov 26, 2016 7:46:41 AM / by Shawn Lucas

Shawn Lucas

While viewing a chart, you are actually looking at two different prices: a historical price and a current price.

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A fresh chart on Apiary Fund's Alveo trading platform initially shows historical data.

Once a chart is open, Alveo starts receiving “Current Price” data from our “Quote Server.” Apiary Fund has multiple liquidity providers who send their current price quote to our Quote Server which collects and organizes the different quotes, finds the best price, then broadcasts it to your computer. The quote servers feeding Alveo are built to send every quote they receive into  the platform.When you first open a chart to trade, you won't have instant access to the current prices. Instead, the chart is back filled with historical data, or previous movements of price action. In Alveo, we fill the chart with data from our "Historic Data" server.

The challenge with current price data is that occasionally we get an incorrect quote from one of our liquidity providers – called a misquote.  Since Alveo doesn’t know whether a quote is correct or not, it will “print” that quote on the chart. As you can imagine, misquotes are problematic for many reasons.

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#1. They affect the validity of market analysis.

Misquotes are not a true reflection of price, and any analysis using a misquote will be inaccurate.  

#2. They might trigger pending orders

If the price limit of the pending order is between the current quote and the misquote, then it will trigger the pending order and give you a fill that is outside the current price.

What are the chances of a misquote?

Take note that no data or quote providers guarantee perfect data.  However, there are ways to decrease the allowances of misquotes. For example, the systems Alveo uses take extra steps to catch misquotes sent to us by our liquidity partners, and to ensure a record of clean data.  These systems catch the vast majority of misquotes, but again, no data is perfect and occasionally a misquote will slip past our watchful eyes – about one in about 100,000 misquotes to be precise.

What if I think I have a misquote?

Most of these misquotes are so close to the current price that you’ll never notice, but occasionally a misquote may pop up that is more apparent. If you suspect there is a misquote on your chart, you can find out by refreshing your data.  This will cause Alveo to pull historical price data.  If the spike on your chart goes away, then you’ll know it was a misquote.  If the spike on your chart remains, then you’ll know it was a good quote.

Happy Trading!

Topics: Trading

Shawn Lucas

Written by Shawn Lucas

Shawn Lucas is the founder and fund manager at the Apiary Fund. He began his career as a broker where he worked the trading desk and processed trades for high net worth investors. An expert in the field of technical and economic analysis of the financial markets, Shawn has since established his reputation as a thought leader and speaker in the financial services industry. Shawn's simple and methodical approach to the markets has helped thousands of investors better understand and improve their performance and profitability in the financial markets.

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