slippage

[lindq]

Quote from elit:


I'm wondering how important a factor slippage is when testing a system that is based on daily or weekly data? (Or points..., FYI I'm using metastock)

I include $20 on each side slippage when testing multi-day strategies with high volume stocks. (assuming 1,000 share lots.) Even so, if a strategy shows only small/fractional gains, then it probably isn't worth pursuing.

Much depends on your entry and exit strategy. If you are buying opens and selling closes on daily bars, your backtesting is likely to be less predictive than if you are using daily data for setups, then watching for intraday entry points. A market order on open or close leaves you open to a lot of variables when you move to real time trading.

I prefer market orders, because I deal with fairly high volume stuff and when I want in, I want in. I will only use limit orders when a spread is wide and threatens to stay that way.

Only actual experience with entries for your strategy will give you the answers you need. But for backtesting, always assume that the real world will not provide perfection. Because it won't.

 

[elit]

Quote from bunanlover:

Slippage : stocks: 0.02 $ per share per side for liquid one and 0.03 $ for others.

futures : One tick per side or one tick round turn for eminis.

forex : spread + one pip round turn.


Don't forget to use slippage for stop, market and limit orders( question of unfilled orders ... ).

If you trade with daily and weekly charts, it will not affect your trading too much.

I hope metastock automatically uses the slippage for all types of orders, but i can't see any reason it shouldn't.


When making a limit order, say buy at $25.55, will my order be filled at $25.55 or can it be subject to slippage also?

I guess it's a matter of whether the slippage or the unfilled orders are more expensive. If the system gives quite sure-fire signals, and only a few limit orders don't get filled, that would be prefered. But on the other hand the limit order should be placed on exactly the price that gives the signal, or else there is "indirect" slippage.


Would you advise me to consider slippage when using a daily/weekly system?