Estimating Slippage in Stocks and ETFs

Discussion in 'ETFs' started by User50000, Nov 25, 2003.

  1. Stock traders, I have a question for you...

    In very liquid stocks and ETFs (e.g., MSFT, CSCO, QQQ, etc.), what would be a good estimate for slippage on market orders? To keep things simple, let's assume that you are using either IB or Tradestation for execution. Let's also assume that your size is anywhere between 500 and 5000 shares.

    Here's an example scenario:

    Let's say I'm trading MSFT and the market is 25.00 x 25.01 (bid x ask). I want to buy 5000 shares at the market (attempting to hit the 25.01 offer). Assuming moderate volatility and adequate size on the offer, how much slippage can I expect?

    2 cents (filled at 25.03)?
    5 cents (filled at 25.06)?
    10 cents (filled at 25.11)?

    Thanks for your help!
  2. I bet you would get something close to ZERO cents slippage,
    1-2 cents with some bad luck.

    On 5000 shares you MIGHT get 1 cent slippage on MSFT,
    if your unlucky.



  3. axeman is correct, only exception would be on good/bad news and a fast market.

  4. Axeman & Stock777,

    Is this estimate based on a setup that includes using either Interactive Brokers or TradeStation for execution? If not, what kind of platform and broker did you have in mind when making this estimate?

    Thanks for your responses!
  5. This is based on observing the stocks bid/ask spread/size behavior.

    Watch the bid/ask size and spread of these stocks during
    the day for a little while using a good broker.

    It will become pretty obvious quickly that you would have
    a hard time blasting through more than 1 cent of liquidity
    on these stocks.

    The spread is almost always a penny, and there is almost always
    way more liquidity available than you are asking for.



  6. Eldredge


    With the big Nas stocks I agree that you won't see much slippage at all. With NYSE stocks it could be a different story. Most of the listed stocks I trade aren't the huge ones, so I'm not sure about them. In the less than huge NYSE stocks, the specialist will frequently post "fake" bid/offers, and you could see more significant slippage - of course there is always "price improvement" if you are on the right side. This is one of the reasons I like Nas - you can buy what you see.
  7. thank you for this.where would we be without your brilliant analysis at every turn :-/
  8. Hmmmm.... although Longshot is in my ignore list,
    and I cant see what he has written, and I refuse to turn
    him back on and reply to his idiotic postings, it's interesting to see
    his posts follow me around.

    Looks like longshots fragile ego has been so badly beaten
    down by me that now he stalks me on ET and has to post
    more idiotic drivel in response to any message I post.

    Poor guy has gone off the deep end :D
    He must have short mans disease, or short penis disease
    as the the user "longshotspenis" explained to us long ago: