Bid/Ask & Slippage

M

MoneyMatthew

I think out of all of the forums on here you guys who are trading with prop firms could best answer this question.

To my knowledge it is not possible to backtest how slippage might occur and an estimation is really all that is possible.

If one were to take a Market Order at or near the OPEN of the trading day on a stock that averages over 1 million shares a day in Volume with an average Bid/Ask of $.01 then what would be the best amount to take away from running daily net profits per trade?

$.02 cents would be the best case scenario in and out total on the trade correct? Worst case would be $.04 per trade?

Please note that I am not factoring in the Prop Firm's commission charges yet. I am speaking only on order execution for a high volume stock with a tight bid/ask.

I am asking for number that I should take away from my per-share gross P&L equity curve per trade.

Thanks,
Matt
 
Let me add that in this example using 1 lot or 100 shares is fine. I know slippage along with execution get harder as the size of the order goes up.
 
you need to forward test to account for slippage and volitality. I have seen stocks that you have described rip more than 50 cents in an instant due to all the orders rushing in at the open. You will get conned on market orders this is certain.

forward test with small size its the only way to get the answer you are looking for. there is no magical number or percentage.
 
Quote from walterjennings:

I'd also warn of bad ticks in historical data and live feeds. They confound backtesting and are more common than you think.
More...

They certainly are. :(
 
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