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	Forums ›› Technically Speaking ›› Automated Trading ›› How do you emulate slippage in a backtest?

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savagemp5

Registered: Mar 2011
Posts: 205

09-09-12 04:17 AM

Maybe another way is to randomize a 1-5 second delayed fill, resulting in a possible change in current b/a spread. At least that is what i see over at my terminals at times.

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DeeDeeTwo

Registered: Dec 2007
Posts: 623

09-09-12 01:42 PM

Quote from WinstonTJ:

Even then you can't assume that an execution would have been yours - it's always best to go a penny up/down from your target price. If you are trying to sell 1000 shares offered at $10.61 assume you get a fill when you see more than 1000 shares print at $10.62. That extra penny may be too pessimistic for some strategies...

This is an engineer's idea of professional trading.

If you are paying "slippage" = paying bid-ask spread...
Then you are increasing your commission by 200% to 400% and up...
And are totally screwed in the long run.

Instead of paying $0.003/share... it's really $0.008 or $0.013 or whatever...
Thank you kindly for donating to the NYSE Member Yacht Fund.

You MUST manage the spread well enough...
That your "slippage" is positive = capturing part of the spread...
And you are being paid for providing real liquidity.

Anyone who doesn't instinctively get this...
And can't be bothered to finesse the spread...
Is not competing... they are just donating for a while.

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