Executions

D

Doyle

I am interested in the execution piece of this - once all the coding and backtesting is done, how do you route the orders to get the best possible execution and how do you automate this?

It seems like a lot of strategy trading relies heavily on reducing slippage and fees so that you can reduce your parameters for profitable setups.
 
I can create any number of profitable "backtested" strategies using Tradestation. Even plenty when factoring in commish. The problem lies with slippage. This is the unknown variable that is the "Backtested system" killer. And the shorter the time frame the nore lethal is slippage.

Longer time frame strategies are not as subject to the problems of slippage. I know I am not teling you anything new, but perhaps validating your observations.
 
So how do you combat the slippage factor? How does Tradestation route the order that causes you to miss markets?

I guess what I'm getting at here is what systems would you use to minimize slippage once you go about actually executing your system. Is it automated or does your system just display the action that needs to be taken and you have to enter the order yourself somewhere?
 
It doesn't matter whether it is tradestation or any other brokerage, slippage occurs because the market is moving as you place your order. The price you see is already old. Not by much, but still. Even if you have Tradestation automated - not recommended - it will still take some small amount of time to get to the market. And if it is a NYSE stock, the specialist has 2 minutes to fill even a market order.

With TS language, lets say you use "buy this bar on close" or "buy next bar on open". The system will use that very price as the price you get. Which you won't. You don't know the closing price unitl the close, and neither does the system. So it sends the order after the close. And there is still the bid/ask to deal with.

Even if you use the open of the next bar, the same dynamics apply.

What is needed is a longer time frame so that you will have fewer trades, larger profits, and the need for a pinpoint entry is negated.
 
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