slippage

M

mind

is it more accurate to calculate slippage as a percentage of the traded underlying or in absolute points?

i am aware that many daytraders use absolute figures but i feel this is not really correct, since it distorts the picture. my argument is that people who use a percentage of their capital at any trade must reflect that when they calc their slippage as well.

the absolute daily range of the sp future correlates by 0.79 with the future, whereas the daily range calculated as a percentage of the futures only correlates by 0.27 with the future. analysis since 1987. this does not mean more nor less than that the market is much more thinking in percentage terms than in absolute points. this means that whenever you use fixed points for a system you are overgearing in below average periods and overshooting in above average periods.

the "mistake" is not that bad, since most daytraders cannot vary their investment to easily plus the timeframe over which they calculate their ranges are usually pretty short.

my poit is that a slippage of 0.4 points on the emini means something different now than it did three months ago.

anyone able to shed light on this?


ps, sorry that this post is probably a tough read.
 
I think estimating slippage should be connected with:

- your avg order size vs avg # contracts at bid/ask
- avg spread.

Based on your real trading experience, what is more accurate slippage figure with ~100 contract orders on Emini S&P: 0.5 pts per round turn or 1 pt / RT?

In backtesting, using constant point slippage for the whole period isn't always realistic. For example in 2000 bid/ask spreads on NQ futures were much wider than in 2003. Slippage in percentage terms is some solution, but also can be unrealistic - when avg spread is higher than your calculated slippage.

 
my post was referring to other markets as well, like currencies, bonds and commodities.

i for myself do not like that point thinking at all. it makes it impossible to quickly compare markets. i care about percentages, since this is what this game is finally about. why should i bother with twenty different languages when i could have one?


another thing is that i pesonally do not have tape data for several years. and the style i am talking about is not scalping at all, trades two or three times a day on max.
 
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