Testing With RTH Data vs Composite Data
Posted: Mon Nov 20, 2006 8:06 am
I had been doing all my system testing using RTH (open outcry, regular trading hours) data. However, I recently started trading using electronic trading. When I switched my data test files from RTH to composite, I reran a 20 year test and found substantially different results using composite data compared to testing with RTH data. I understand why there should be some differences:
1. trades executed at different prices in composite vs RTH
2. lower liquidity (at least when electronic trading was in its early stages) led to higher volatility so that daily highs and lows were farther apart in the composite data. This in turn can lead to trades being entered or exited that would not have been entered or exited using only RTH data.
I am interested in the experiences of others in testing and trading using composite versus RTH data and markets. Have others seen significant differences in testing using composite vs RTH data? Is long term (20 years) testing using composite data sensible if early electronic trading had lower liquidity and higher volatility? Do others agree that early electronic trading had lower liquidity and higher volatility? As volume grew in electronic trading, has liquidity increased and has daily composite volatility decreased compared to RTH only trading? How have others handled long term testing with regards to composite versus RTH data?
1. trades executed at different prices in composite vs RTH
2. lower liquidity (at least when electronic trading was in its early stages) led to higher volatility so that daily highs and lows were farther apart in the composite data. This in turn can lead to trades being entered or exited that would not have been entered or exited using only RTH data.
I am interested in the experiences of others in testing and trading using composite versus RTH data and markets. Have others seen significant differences in testing using composite vs RTH data? Is long term (20 years) testing using composite data sensible if early electronic trading had lower liquidity and higher volatility? Do others agree that early electronic trading had lower liquidity and higher volatility? As volume grew in electronic trading, has liquidity increased and has daily composite volatility decreased compared to RTH only trading? How have others handled long term testing with regards to composite versus RTH data?