Description:
The tick rule is one of the most popular trade classification algorithms used when an order initiator in market data is not signed. Using 11.9 million trades of Bitcoin/USD on Bitstamp, this article tests the accuracy of the tick rule in the Bitcoin market. Evidence indicates that the overall success rate of the tick rule is 76.87%. It is also shown that the tick rule is inclined to fail in discerning trade intentions when there is a long period of time between trades. Furthermore, order imbalances computed using the tick rule lack sufficient accuracy in the Bitcoin market.