Talk:Slippage (finance)
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Personal observation
editSpeculation
editIn statistical terms, I figure I have traded about 2 million contracts, with an average profit of $70 per contract (after slippage of perhaps $20). This average is approximately 700 standard deviations away from randomness.[1]
-oo0(GoldTrader)0oo- (talk) 04:13, 21 May 2009 (UTC)
Quantify
editHowever the slippage is much more difficult to quantify. The trader might have a mental image of trading at the prices shown on a computer screen, but in reality he must continuously buy at the offered price and sell at the bid price.
The spread between the bid and offer becomes a very substantial but hidden cost of doing business. In addition, as most of us have learned many times over, it is unrealistic to expect stop orders to be filled at our stop prices. [1]
Testing deduction
editA deduction of $100 was taken from each trade for slippage and commission. Personally, I think $200 to $250 per trade for slippage and commission is more reflective of reality in trading the S&P. [2]
Slippage
editSlippage occurs when you are filled at the ask instead of the bid. If this happens on entry and exit, the total slippage per trade is two ticks. Two ticks can easily wipe out 50% of the profits from a trading system.[3] -oo0(GoldTrader)0oo- (talk) 04:42, 21 May 2009 (UTC)
References
- ^ Niederhoffer, Victor. The education of a speculator (1998) p156 ISBN 0471249483
- ^ Smith, Gary. How I trade for a living (2000) ISBN 0471355143
- ^ Carstens, Henry. Introduction to Testing Trading Ideas (2007)