Market Data Explained
Market data covers trades, quotes, order book depth and reference data. Learn the main types, levels of data, real time vs delayed feeds, costs and common pitfalls.
Market data is the information generated by trading: the prices at which trades happen, the bids and offers waiting in the order book, volumes and related reference information. Every chart, indicator, backtest and trading algorithm depends on it. Understanding what market data contains, how it is delivered and where it can mislead you is a foundation for both discretionary and systematic trading.
Types of market data#
| Type | Contains | Use |
|---|---|---|
| Trades (time and sales) | Price, size and time of each trade | Volume analysis, VWAP, tape reading |
| Quotes (top of book) | Best bid and best ask with sizes | Spreads, execution decisions |
| Depth of book (Level 2) | Multiple price levels of bids and offers | Order flow, liquidity assessment. See Market Data Levels: Level 1, 2 and 3 |
| Full order book (Level 3) | Individual orders, additions, cancellations | Market making, research |
| Bars (OHLCV) | Open, high, low, close and volume per interval | Charts and most backtests. See Tick Data and OHLCV Data |
| Reference data | Symbols, contract specifications, corporate actions, trading calendars | Correct processing |
| Derived data | Indices, implied volatility, Greeks | Analysis |
Levels of data#
| Level | Typical content |
|---|---|
| Level 1 | Last trade, best bid and ask, daily volume |
| Level 2 | Several price levels of the order book, often aggregated by price |
| Level 3 | Individual orders (and, for some participants, ability to enter quotes) |
Real time, delayed and historical#
- Real time data: delivered as events happen; exchanges charge fees, especially for professional users. See Real-Time, Delayed and Historical Data and Market Data Fees.
- Delayed data: often 15 minutes behind; usually free.
- End of day data: daily bars after the close.
- Historical data: archives for research and backtesting. See Historical Data for Backtesting.
Consolidated vs direct feeds#
In US equities, trades and quotes from all exchanges are combined into consolidated feeds (the Securities Information Processors, or SIPs). Large firms also buy direct feeds from each exchange, which are faster and contain more detail. The difference in speed, often measured in microseconds to milliseconds, matters for high frequency trading. See Latency in Trading.
Common data problems#
| Problem | Effect |
|---|---|
| Bad ticks | Erroneous prints create false highs and lows |
| Missing data | Gaps in history distort indicators |
| Unadjusted corporate actions | Splits and dividends create false jumps. See Splits and Dividends in Price Data |
| Time zone errors | Misaligned data across markets. See Timestamps, Time Zones and Daylight Saving |
| Survivorship bias | Datasets missing delisted securities. See Survivorship and Selection Bias |
| Different session definitions | Including or excluding pre and post market trading |
See Cleaning Market Data.
Market data in crypto and prediction markets#
Crypto exchanges publish their own trades and order books through APIs and WebSockets, usually free. Prices differ across exchanges, so many traders use indices that combine several venues. Prediction markets such as Polymarket publish order books and trade data, and settlement sources such as Chainlink price feeds are a separate data stream. See WebSocket Market Data Streams and Oracles.
Choosing market data#
- Match data to strategy: daily bars for swing trading; tick or depth data for scalping and execution research.
- Check licensing and redistribution rules.
- Understand timestamps and session rules.
- Validate data quality before trusting backtests.
Frequently asked questions#
What is market data?#
Information produced by trading activity, including trade prices and sizes, bid and ask quotes, order book depth and related reference data.
What is the difference between Level 1 and Level 2 data?#
Level 1 shows the best bid, best ask and last trade; Level 2 shows multiple price levels of bids and offers in the order book.
Why do exchanges charge for market data?#
Real time data is a major revenue source for exchanges, and fees depend on usage, user type and how the data is distributed.
Next, learn about company financial data in Fundamental Data.
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