Including Slippage within a System

[Chorlton]

Hello All,

I'm currently developing a system that will trade the constituents of the FTSE250 and would now like to include slippage into it for the purposes of more accurate backtesting.

My question is (i) what value/s should I use and (ii) should this value/s vary depending on the underlying stock price?

Possible Ideas:

Idea A: Using 3% for stocks priced at £1.00 and under, 2% for stocks between £1.01 and £4.99 and 1% for stocks over £5.00

Idea B: Similar to Option A but using specific number of pence for each price range. Using 2p for stocks priced at £1.00 and under, 3p for stocks between £1.01 and £4.99 and 4p for stocks over £5.00

Idea C: Regardless of stock price, adding a fixed number of pence to the Buy Price such as £0.05 or a fixed percentage



Thanks in advance,

Chorlton

 

[Adamus]

I'm not a stock trader but in futures, I base the slippage on a mixture of advice I got from this forum and on a sense of fear that it'll be worse than that. Once I apply generous slippage, it breaks my system and I get really grumpy. Then I come back a day later and reduce the slippage to something I hope might not be too optimistic, and it severely retards my system but leaves it tradeable.

I guess you have to trade live and work it out for yourself.