View Full Version : Accounting for bid/ask spreads
10-07-2008, 09:04 AM
Say a stock typically has at least a 10 cent difference between the bid and the ask. What is the best way of taking this into account when back testing market orders? I`m adding it as a commission at the moment.
10-07-2008, 09:43 AM
Instead of commission, maybe you can try using the Slippage options?
10-07-2008, 11:27 AM
I thought ticks were a measure of time, can you give me an example of how to use these options? Entering .1, 10, 100,1000 etc for the slippage value doesn't seem to have the level of affect I would expect compared to entering a per share commission of .05. There also seems to be a limit to the value you can enter, capped at 20.
10-07-2008, 11:39 AM
Slippage is measured can only take on integer values and is representative as to the number of ticks you want the slippage to be.
10-07-2008, 12:11 PM
Could you define what a tick is in this context please so we are on the same page?
I ran some tests to try and figure it out myself by running a back test and adjusting the slippage value.
54 trades, 100 shares per trade
Slippage Loss Loss from Slippage
0 813 0
10 895 82
20 927 114
30 927 114
40 927 114
50 927 114If I did 54 trades with a slippage of 10 cents, I would expect the loss from slippage to be around 54/2*100*.1=$270?
10-07-2008, 01:19 PM
A tick varies from instrument to instrument. You can see what it is defined as for your particular instrument by bringing up the Instrument Manager. Stocks generally have a tick size of 0.01.
10-07-2008, 02:05 PM
Aha, thank you for clarifying that. Do those numbers look right to you? The amount of loss from slippage for a value of 10 seems too low, and if the amount of slippage doubles, wouldn't the loss from slippage double too?
10-07-2008, 02:47 PM
It is hard to say. You will need to use TraceOrders = true and compare actual fill prices versus the prices you submitted at.