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Backtesting and bid-ask spread
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Backtesting and bid-ask spread

  #1 (permalink)
Trading Apprentice
Neaples Italy
Futures Experience: Intermediate
Platform: NinjaTrader, MetaTrader
Favorite Futures: Forex
Posts: 2 since Mar 2015
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Backtesting and bid-ask spread

I use NT7 with imported 1 min forex data, that Ninjatrader handles by considering only bid prices.

I saw there is no way to include bid-ask spreads into backtesting, so my workaround is that of setting a commission, then backtesting with "Include commissions" set to true, and simulating trades with a fixed lot size, proportional to commission.

- I want to backtest on EURUSD, assiming a bid-ask spread o 1 pip.
- On Instument Manager I set Minimum Commission = 0.5 (because it's per side).
- I backtest assuming single trades with 10000 units, so that I pay 1 pip = 1$ per trade and the spread is equalized the commission.

This is all good and working if I want to test the pure signal, or if I'm using a fixed lot type position sizing.

But, let's assume that the lot size traded depends on an ATR stop so that the lot size is variable every time.
In this case I would pay a 1$ spread for every trade, regardless from lot size, and the equity line would be wrong.
This means that I can backtest this kind of strategy only without commission.

Any way to work around the problem?
Would I have this problem were I using Kinetick?
What's another backtasting platform that would not have this inconvenience?
(I'm testing Seer Trading, but it has bugs loading historical data)

Thank you.

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  #2 (permalink)
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You can do it with GomRecorder and also I think Gom Tookit for Strategies


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  #3 (permalink)
Trading Apprentice
Neaples Italy
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I just saw it can be done using the 'Slippage' options from the Backtester.

I use Slippage instead of Commission so, for a 1 pip spread I set a 0,5 slippage.

Slippage can also be set through NinjaScript and the 'Slippage' keyword.

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