How large should transaction costs be for backtesting futures?
|March 10th, 2013, 10:15 AM||#31 (permalink)|
Dallas, Tx, USA
Futures Experience: Master
Platform: tradevec, technaylzer, tradestation,
Favorite Futures: if it moves or if it doesn't i trade it
Posts: 42 since Mar 2013
Thanks: 5 given, 17 received
i want to help the op that is why i am here anyway. he can win this negative and make it a positive by breaking from typical accepted theory.
i will state that the op expects to get a fill on his position, he is hoping to get a price that he sees or that his model says he should get. when he gets that fill back and it's better than he expected by enough to more than cover all cost why should he use any negative cost in his testing?
1st image). trading in single lot mode - in the first image is a system using slippage and commissions "only" for the satisfaction that some "believe" they can not be avoided. i call this the original order - it's what i expect worst case - it's what you expect.
2nd image). trading in single lot mode with up to 2 better additional entries enabled - free money trades no commission no slippage only additional profits i would not have otherwise received. normally you would need of course the margin to add on additional trades. but with a couple of hundred thousand extra dollars per market i suspect that will not be a problem as the model will pay it's way.
3rd image). trading in single lot mode with 2 better additional entries with fixed ration enabled - note that the risk is never more than the original risk would have been in the first place. when we flip on "fixed ratio" the little 100k system now makes 1.5+ million which still includes slippage and commission on the initial contract but not all the free trades i didn't expect to take with the original order. but i could add the cost it really would not matter still if you have a model which in capable of "Positive Slippage"!
i concede one correction i did mean .19 cents no doubt it adds up at 50k rt a day but still cost me nothing in real life trading.
Last edited by markbrown; March 10th, 2013 at 02:25 PM.