Slippage and Spread

Discussions about the testing and simulation of mechanical trading systems using historical data and other methods. Trading Blox Customers should post Trading Blox specific questions in the Customer Support forum.
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J D Canning
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Slippage and Spread

Post by J D Canning » Wed Apr 08, 2009 1:57 pm

This topic has been discussed at length on a number of occasions, but what I am bringing up here relates to a very specific method of trading - spreadbetting. Using this method, there is no commission to pay per se, instead there is an increased bid-offer spread. The way I have incorporated this into TB is via an increased slippage percentage. I would be grateful to hear other users' views on my rationale. Taking one of the widest spreads - that of Eurodollars - as a specific example: IG Index quotes this at 9890/9892 (Jun-09 as at 1745 GMT on 8 April). I am using the bid offer spread of 2 as a proportion of the 260 day average true range of 11 i.e. 18% as a proxy for slippage. I am then taking an average across all instruments traded and using this as the slippage factor when running simulations. Am I double counting? Slippage applies to both entry and exit as I understand it, so maybe I should be using 9% in this case?

Any feedback is welcome as I realise that slippage is quite possibly the most important consideration when analysing trading systems.

LeviF
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Post by LeviF » Wed Apr 08, 2009 2:27 pm

I think I would probably declare "spread" as an IPV and set the value for each instrument at the test start based on what ever you feel is appropriate from your research. Then, you can use the addcommission function to deduct each instrument's spread every time an order is filled.

matti
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Post by matti » Sun Jan 10, 2010 8:23 am

JDC

Working on this problem currently, nothing brilliant to report yet.

Have you settled on a solution that works for you?

Regards

Matt

J D Canning
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Post by J D Canning » Mon Jan 11, 2010 4:57 am

I am currently using the Custom Slippage Blox as a proxy for spread. I don't have the Builder version of TB yet, so this is currently based around adding/subtracting a proportion of ATR rather than an absolute value per instrument (which would be my preference).

It seems to be working well so far - the total slippage as a percentage of trading profits is pretty eye-popping, which must be a good sign (?).

matti
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Post by matti » Mon Jan 11, 2010 5:27 am

JDC

Thanks for the reply. Shortly after posting the question to you i found the thread with the blox you mention. Will down load and start playing with it this week.

Slightly different topic but one touched on in this thread. I too 'only' have TB Pro. I wonder about the merits of Builder. Is there that much that you can do on it that is that different to the old faithful systems? Just wondering what your thoughts are a little further down the track since your discussions on this thread.

Regards

Matt

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