Bid-ask bounce and the fake signals on tick charts

[Amanhasnoname]

On a tick chart, a price that flips between 1.0850 and 1.0851 looks like volatility. Often it is just the quote bouncing between bid and ask, with no real movement.

This bounce makes tick-based indicators noisy. A moving average on raw ticks wiggles even when the market is perfectly still, and a momentum oscillator can throw signals that mean nothing.

The way around it is to chart the mid price, the average of bid and ask, or to build bars from trades instead of quotes, which many retail feeds do not offer.

A simpler step is to require a move larger than the spread before treating it as real. If the spread is 0.8 pips, any signal smaller than that should be ignored.

The bounce also biases backtests built on tick data, since entries and exits alternate between bid and ask prices, and ignoring that makes results look better than they would be.

Is mid price used for signals, and does it reduce the false triggers on tick charts?