Roll Slippage Calculation Description:

Each time a simulated roll occurs, Trading Blox accounts for the roll by deducting slippage and commissions for each contract in the position. The Open Equity is moved to Close Equity.  If the futures is non-USD denominated, the currency conversion for the roll date will be used to move profit from open equity to closed.  This adjustment locks the the profit in at the conversion rate of the roll.

Global Simulation Futures Parameters Slippage Pct

Global Simulation Futures Parameters Slippage Pct Parameters

The frictional cost of trading has two components: Commissions, and Slippage (sometimes also known as "skid").

 

In actual trading, slippage is the difference between a trade's entry or exit order price, and the price at which the trade is actually filled.

 

In order to accurately reflect the conditions of real trading, the impact of slippage must be simulated during back testing.

 

Since slippage can vary dramatically from trade to trade depending on market conditions at the time an order is executed, Trading Blox employs a slippage assessment technique that is based on market volatility.

 

This calculation creates a simulated fill price by applying a slippage factor value that is added or subtracted from the adjusted entry price.  This difference between order price and fill-price is the simulated slippage.

 

Note:

Orders that use On-Open, At-Stop price order executions have slippage applied; At-Limit and On_Close order executions do not have any slippage adjustments applied.  On-Open, At-Stop price and At-Limit price order executons are also subject to gap Open price 'Open Slippage' adjustments.  On-Close execution orders do not experience gap opening price adjustments.

 

 

For a long entry the slippage factor is calculated by measuring the range from the theoretical entry price to the day's highest price.  That value is then multiplied by the value entered into Slippage % field.

 

For short entries, the slippage factor is calculated by measuring the range from the theoretical entry price to the low. The slippage factor is then added to, or subtracted from the theoretical entry price, to obtain the simulated fill price.

 

Example: ^Top

Here's is an example how slippage is handle with a Long Entry order:

Slippage Calculation Long Entry On-Stop Example

Description:

Example Values:

Slippage percent

25%

Theoretical buy order price

100

High Price (for the day)

120

Slippage Factor

(120 - 100) x 0.25 = (20 x 0.25) = 5

Simulated fill price

Order Price + Slippage Factor = (100 + 5) = 105

 

The distance between the high price and the order price is multiplied by the slippage factor. In this example, the difference between the high price and the order price is 20 points. The 20 points are multiplied by the 25% slippage to get an estimated slippage of 5 points. The fill price for the order will be 5 points worse than the stop order price of 100 simulating a fill at 105.

 

Slippage for sell orders is computed using a similar calculation using the distance between the order price and the low of the day.

 

Note: ^Top

In historical back testing an inability to accurately estimate slippage can lead to two types of mistakes:

ØUnderestimating frictional costs may lead you to trade a system that produces spectacular hypothetical results now, but does not hold up later on in real trading.

ØConversely, overestimating frictional costs may dissuade you from trading an otherwise good system.

It is also worth noting that the more frequently a system trades, the more profound the impact of frictional costs will be.

 

Minimum Slippage: ^Top

This Global Parameter only applies to Futures trading.

 

Minimum Slippage is based on a fixed currency value and it applied in conjunction with Slippage % (above).  This means when the Slippage % field is set to a value greater than Zero, this parameter ensures that some slippage cost is assessed against every trade.

Trading Blox will impose Minimum Slippage only if the currency value resulting from the Slippage % calculation is less than the currency value of slippage, this parameter will ensure the Minimum Slippage parameter value is used to adjust the fill-price.

 

When an entry occurs at or near the price High or Low of the day, the potential adverse range is practically nonexistent, so the Slippage % calculation would be at or near zero. In this case the Minimum Slippage amount can ensure that some slippage is assessed to the trade.

 

If Slippage Slippage % is set to zero the slippage for all trades will be the value specified by the Minimum Slippage parameter amount.

 

Note: ^Top

By using a Minimum Slippage value when the fill is at or near the High or Low price of the day, the fill-price can show a fill-value that is outside the range of the High or Low price of the fill-date.


Last Edit: 9/20/2017

Edit Time: 9/20/2017 07:56:26 AM

Topic ID#: 204

 

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