What kind of slippage should I expect?

Discussion in 'Strategy Development' started by doublet83, Jan 17, 2012.

  1. Curious to see some thoughts on this. Lets say I am trading US stocks that have average daily trading volume of 2mm shares, price of stocks around $15. I execute my trades using IB's algo orders and setting participation limits at 1% of volume. Meaning that if 1mm shares get traded I should have 10k shares filled over the course of the day.

    What type of slippage should I expect at 1% of volume traded? I am hoping that slippage in this scenario would be 20bps or less. However, my experience is that even at 5% of volume, orders are noticably distortive to stock prices.
  2. sf631


    Bumping this thread to see if anyone can add their $0.02, so to speak

    Doublet, curious how you're measuring slippage, or whether you're just referring to an observation that the price seems to move away from you. I've had to resort to calculating my slippage using the IB reporting dimension that shows MTM profits for "PriorOpenMTMPnl" vs. the "TransactionMtmPnl" and calculating slippage as the variance between my trade price and the end of day price (for the trade day). This is a bit backwards of course because I'm implicitly measuring slippage with an end of day price *after* my trade, not the prior day's EOD price, which would be more accurate.

    Nonetheless, I see an aggregate slippage of something around 5-15 bps on symbols with ADV of 50,000 to 500,000 shares, and where I represent between 1 and 10% of volume. Of course true slippage may be worse than that if I could accurately track arrival price.