(50) 20.25 * 20.26 (50) "real price" can be determined if size is equal on the buy side / sell size by the following formula: (bid + ask) / 2; so in this case the real price is 25 1/2 if you enter a buy market order for 100 shares you'll get filled at .26, and since the real price is roughly 25 1/2 your slippage is 1/2 of a penny Today I sent a "buy marketable limit order" routed SMART at 20.26. It took about 10 sec to fill and I feel as if I've cleared all the .26 offers out on all exchanges so now what remains is 20.25 * 20.27, using my same example the "real price" is 20.26, and since I was filled at 20.26 there's really "no slippage" Comments?
I'm not sure you can quantify this. Market doesn't stand still while the broker works your order (especially with SR when it takes seconds to get a fill) - aggressive buyer may step in and hit the offer with on up tick, so you'll get fill @20.28 or even worse. I've seen NYSE sweeps as deep as 20 cents up on an up-tick...
spec, I'm saying if you send a buy limit order @ 20.27. It might be diffcult to quantify but could definitely can quantify it. situationA: rip 100 shares from the offer. situationB: route via smart and rip off all the offers @ 20.27 if each situation is repeated 100,000 times and you hold for 10 minutes which situations yields the greatest return... I have to imagine situation B
When you would have sold at the same moment you still would have gotten 20.25 for the shares. So slippage on RT is 1 ct/share, so 0.5 ct for the individual transaction.
Nice try... but this is VERY faulty logic. Also, using one example is too simplistic. (So 2 big problems). REALITY If you employ market orders... Your additional cost will be... 50% of the average spread for that stock... PLUS brokers and market makers will ** cheat ** for $0.01 or more... Perhaps 10-20% of the time with sleazy routing algorithms. Even with a $0.01 spread... your transaction costs double. But in reality closer to triple. Pros have the spread IN THEIR FAVOR... So "market order" traders... Bend over and take up the ass at least 3 different ways... Which they very richly deserve. You may as well volunteer... To be passed around in a Federal Prison shower.