estimated slippage in percentage terms

RAZ0R99 · Apr 22, 2007

Yes

ChrisMMM · Apr 22, 2007

Quote from EricP:

The answer depends on the share size of your market order. For small share sizes (100-500 shares) your average slippage will be small.

For example, I trade Nasdaq and NYSE stocks with average daily volumes that typically exceed 500k shares per day. Over the last 20,000+ market orders, my average Nasdaq slippage is about 0.2 cents per share (with average share price of $29 per share => avg percent slippage = 0.0069%), and my average NYSE slippage is roughly 0.5 cents per share (with avg share price of $65 per share => avg percent slippage of 0.0077%) .

To summarize, the slippage is not much, unless you are dealing with large orders relative to the liquidity of the stocks you trade.
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Eric,
thank you very much this is exactly what I was looking for

rateesquad · Apr 22, 2007

Quote from itmediaco:

Isn't slippage just the difference between the estimated and actual transaction cost? If you fit a curve to model the book, you can approximate the instantaneous slippage of any size order.

Example:

Order book, ask side.

PRICE SHARES
38.00 100
38.01 200
38.02 300
38.03 400

By fitting an exponential regression function:

y = a + b*(exp(c*x)-1)/c

where

a=37.9999381629324
b=3.552954794315719e-005
c=0.003415835246032454

you can now estimate price based on any size between 100-400.

X Y
100 38
110 38
120 38.01
130 38.01
140 38.01
150 38.01
160 38.01
170 38.01
180 38.01
190 38.01
200 38.01
210 38.01
220 38.01
230 38.01
240 38.01
250 38.01
260 38.01
270 38.02
280 38.02
290 38.02
300 38.02
310 38.02
320 38.02
330 38.02
340 38.02
350 38.02
360 38.03
370 38.03
380 38.03
390 38.03
390 38.03
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How exactly have you developed a,b,c? On top of the head?????

demoship · Apr 22, 2007

every once in a while someone posts a market order disaster story here.. go read some of those.

itmediaco · Apr 22, 2007

Quote from rateesquad:

How exactly have you developed a,b,c? On top of the head?????
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Sorry... I reread my preceding post and the example is wrong. To answer your question, the parameters are estimated with a linear least squares regression. Since the OP already found the answer he was looking for, PM me if you want to chat about this in detail.

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estimated slippage in percentage terms

RAZ0R99

ChrisMMM

rateesquad

demoship

itmediaco