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I'm very new to futures trading. I want to backtest something using ES data and my question ies : how many ticks do you use as transaction costs ? 1, 1.5,2 ticks ?
Thanks,
David
Can you help answer these questions from other members on NexusFi?
Personally I've never heard of people using ticks as transaction costs.
I believe it would be a matter of factoring transaction costs separately, as generally commissions don't necessarily match the instrument's tick value.
How come are you thinking about using tick as transaction cost?
I trade forex (EURUSD) and normally the spread is around 0.2-1.0 points and then you have commissions around $3.5 per said than translated in points terms is around 0.75 pips, 1.0+0.75 = 1.75 pips per trade
if 1 tick in ES is $12,50 and I assume 1 tick slippage/spread + $4 round trip commission I have = $12.50+$4 = $16.50 which is 16.50 / 12.50 = 1.32 ticks. So I need at least 2 ticks to be profitable regarding backtesting.
Okay, I see how you're using 'ticks'. You use calculations like 1.32 ticks and then you round it up to 2 ticks to provide an indicative figure.
I may be wrong but certain platforms (e.g. NinjaTrader) allow you to perform backtesting by also factoring in the commission cost that your broker provides, and probably you can include slippage too.
I say 'probably' because I have NinjaTrader but I use it as secondary platform so I don't know it that well.
I usually assume 2 ticks round trip slippage for ES, plus commission. It might be a little on the high side, but I like to be conservative when backtesting.