Choosing a broker: Part 4 – Historical data and charts

In the previous articles, you already learned about broker regulation, the trading platform, and the trading conditions. Another topic we cleared earlier was that since the trading systems rely on historical data, you should be very careful when choosing your data source.

Most of the brokerages maintain historical data with sufficient quality, but you should examine it before you commit to real trading. There are several factors you should consider when checking the historical data of your brokerage:

Time zone of the broker

The charts in MT4 and MT5 are aligned with the time zone of the server. There is no possibility to adjust the time zone of the charts you are using. Due to this, the time zone which the broker chooses to set their server to is going to affect the charts. The most “proper” time zone for MT4 and MT5 is GMT+2. The simple reason is that 16:59 New York time which is considered as EOD time for the Forex markets is 23:59 GMT+2. This way if the MT4 or MT5 is set to GMT+ 2, the trading week starts at 00:00 on Monday and ends at 23:59 on Friday; every new day starts at 00:00 and all the bars are properly aligned.

If a server is set to a different time zone, for example, there can be several bars on Sunday, or the Friday close will be earlier. These discrepancies between the bars can change the values of the indicators your trading systems are using. As a result, a trading system that triggers a signals one broker might not actually trigger the same signal in a broker in a different time zone.

Period and quality of the historical data

Another important factor for running proper back-tests is the period and quality of the historical data. You should examine the historical data which comes from the broker you are considering for live trading. You can use a demo account for a rough estimate, but always log in to a live account to check the real conditions. There are several things you should consider.

The first thing is to check how far the data goes back in time. If they have only a couple of years it wouldn’t be sufficient for a statistically significant back-testing.

The second thing you should be careful about is missing data – check for price gaps and missing bars.

The third thing you should examine is strange price movements (spikes) on the charts. The presence of such spikes is concerning because it means that the price feed and probably the execution of this broker are problematic. You should avoid such brokers if you don’t want to be filled with wrong signals.