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ES limit order queue data or average value


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ES limit order queue data or average value

  #1 (permalink)
rock8790
Portland, OR
 
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I've read through the many helpful threads on this forum about limit order queue and how it can cause backtests to differ from real-life automated strategies. My understanding is that backtesting systems flag orders as filled when the limit price for an order is touched, but in live trading the limit order is in a queue and is only filled if some number of orders get filled at that price first.

TradeStation has a backtesting option that can roughly imitate the queue, the third option in the picture below.



So the question becomes: how do I find average queue size for a given instrument, in this case ES? I've read NinjaTrader provides this, but TradeStation does not.

Thanks.

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  #3 (permalink)
 marpol 
San Francisco, CA
 
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Just look on your DOM and see how many cars are sitting on the bid and ask. For ES it is between 200 and 1200. 300-600 should be safe.

That being said careful backtesting scalping systems.....they rarely backtest well.....

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 Schnook 
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It also depends on time of day, but in most cases, you probably won't be in the middle of the queue anyway. Depending on how you set up your strategy, your limit order will most likely come in well behind the market makers. Quite honestly I thing you'd be better off using option 2 for your backtests.

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  #5 (permalink)
rock8790
Portland, OR
 
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marpol View Post
Just look on your DOM and see how many cars are sitting on the bid and ask. For ES it is between 200 and 1200. 300-600 should be safe.

That being said careful backtesting scalping systems.....they rarely backtest well.....

Thanks for pointing this out, just to clarify when you say DOM you mean the screen below?


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  #6 (permalink)
 marpol 
San Francisco, CA
 
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Thats the one...you can see how many contracts on the bid and ask at each price level.....when you put your limit order in you add to that number (at the end).....

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rock8790
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Bladesmith View Post
It also depends on time of day, but in most cases, you probably won't be in the middle of the queue anyway. Depending on how you set up your strategy, your limit order will most likely come in well behind the market makers. Quite honestly I thing you'd be better off using option 2 for your backtests.

I tried this an it made the strategy more pessimistic, taking fewer trades. It was profitable but I thought maybe I was leaving money on the table. Do you think it's better to do pessimistic backtests vs trying to get them as close to reality as possible?

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 Schnook 
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rock8790 View Post
I tried this an it made the strategy more pessimistic, taking fewer trades. It was profitable but I thought maybe I was leaving money on the table. Do you think it's better to do pessimistic backtests vs trying to get them as close to reality as possible?

Reality is pessimistic

I do think it makes sense to be conservative with your assumptions before committing capital to an unproven strategy. If you are entering on limit you will miss fills. And quite often the ones you're most likely to miss are the very ones you want to be in - those perfect setups where price goes straight to your target without ever looking back. The only way to catch those fast directional moves is to enter at market.

Besides, being more conservative with your assumptions gives you just a bit more wiggle-room for things like slippage or other potential issues. Believe me, it's much better to be pleasantly surprised when you finally plug it in than to go in with unrealistic expectations.

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