Easy way to account for slippage in paper trading?

Discussion in 'Trading' started by CasperCRF, Feb 14, 2006.

  1. I've tweaked my strategy and have been paper trading it again. I'm taking into account commissions but I don't know what I should do about slippage. The last time I paper traded was on a simulator that didn't account for slippage and it gave me much better fills which skewed my results. I'm using only 100 share size in stocks that have plenty of liquidity. Right now my results look promising:

    W/L 2.77
    Win% 66%
    Avg win $36.59
    Avg loss $13.22

    The problem with this is I'm using my entries and exit's as fills at my exact prices. How would slippage effect this and is there a way to account for it in backtesting?
  2. 0.3 % if you are watching it carefully.

    so thats 1/3 of a percent.

    Around 10 cents for a $30 stock.

    0.5% 1/2 a percent if you are not watching it carefully.

    Around 15 cents for a $30 stock.

    Less if you limit in limit out of course, but I always market.

    Round trip, spread in , spread out.
  3. bitrend


    The biggest question is once your system will be put in real trading, will you fully follow your system's signal? Or sometimes you will exit before your system tell you to exit.
  4. cnms2


    Consider all your buys at ask and all your sells at bid. Any better fills will be a bonus, but don't count on them. This applies to options trading too, where the slippage is a larger percentage of the asset price. When you're backtesting, for the asset you're trading eyeball the bid-ask spread that includes about 90% of the cases, then use it for all your transactions. If you're not profitable this way, you'll have a problem during live trading.
  5. ================

    Unless you trade excessively , slippage in liqiud stocks shouldnt be the main problem.

    Looks fine ,ASSUMING you have tested in plenty of cycles ;
    killer sideways slop-chop trends.

    Its the losses ,
    which seems to be acceptable on paper,
    can draw down & bother & help some quit with real/real time money. Trading small @ first helps.