Slippage in Backtesting

August 17th, 2022, 12:45 PM

In your experience using TradeStation backtesting, do you normally use slippage per trade or slippage per contract? For example, I am working on a MCL script, and I know 1 tick is equal to $1.00. So, I factor in $2.00 (2 ticks) of slippage per trade (which is just my stop loss, my entry is a limit order). However, I was wondering if it would make more sense to set slippage per contract instead of per trade? I don't think we would set $2 of slippage per contract, especially on larger orders.

Thoughts?

August 17th, 2022, 01:52 PM

IMHO of course per contract and sorry, I don't understand your logic because of larger orders, you can be sure, the larger the order, the larger the slippage (special with thin markets)

kevinkdog · August 17th, 2022, 02:13 PM

always use per contract

August 17th, 2022, 02:15 PM

tr8er

IMHO of course per contract and sorry, I don't understand your logic because of larger orders, you can be sure, the larger the order, the larger the slippage (special with thin markets)

So you think $2 slippage per contract (if there�s usually 1-2 ticks of slippage) is the correct way to approach this?

I think I meant larger orders would see 30 ticks or more of slippage if I took the $2 per contract slippage approach.

August 17th, 2022, 02:19 PM

kevinkdog

always use per contract

2 ticks of slippage per contract? That seems like a lot for MCL, but I�m relatively new to this.

kevinkdog · August 17th, 2022, 02:22 PM

gftrader

2 ticks of slippage per contract? That seems like a lot for MCL, but I�m relatively new to this.

I don't trade MCL (I trade CL instead), so I'd recommend 2 to start, and after enough real fills, you might decide to reduce it or increase it.

Looking at bid ask spread for a minute, it could be more than 2 ticks. I see it bouncing from 1-4 ticks, usually 2 though.

It might seem like a lot, and it is, because it is a significant cost of doing business. It will kill many strategies.

Of course, limit order have no slippage, but they have their own gotchas.

August 17th, 2022, 02:22 PM

gftrader

So you think $2 slippage per contract (if there�s usually 1-2 ticks of slippage) is the correct way to approach this?

I think I meant larger orders would see 30 ticks or more of slippage if I took the $2 per contract slippage approach.

I don't have experience with MCL, I just trade CL (3 contract max) and there is the slippage around 1 tick or a bit less. MCL has around half the volume of CL, but the moves should be similar, so you should use the amount of your trading experience with it.

August 17th, 2022, 02:44 PM

kevinkdog

I don't trade MCL (I trade CL instead), so I'd recommend 2 to start, and after enough real fills, you might decide to reduce it or increase it.

Looking at bid ask spread for a minute, it could be more than 2 ticks. I see it bouncing from 1-4 ticks, usually 2 though.

It might seem like a lot, and it is, because it is a significant cost of doing business. It will kill many strategies.

Of course, limit order have no slippage, but they have their own gotchas.

Thanks! Any experience with NQ and MNQ and the usual slippage per contract with those?

kevinkdog · August 17th, 2022, 03:14 PM

gftrader

Thanks! Any experience with NQ and MNQ and the usual slippage per contract with those?

I would recommend for any instrument first looking at the typical bid/ask spread, and using the upper end of what you see.

I have pretty detailed estimates for just about every futures market, based on statistical analysis and real money trading, but I can't freely share those.

But the spread is a good starting point for most markets (Gold would be an outlier to that rule).

Slippage in Backtesting

Discussion in EasyLanguage Programming

Slippage in Backtesting