Slippage in daily or weekly test?

[expensif]

Hello everybody!

I'm wondering how important a factor slippage is when testing a system that is based on daily or weekly data? My data is EOD and i also want to test my system in weekly in metastock also.


I understand that slippage is important when daytrading short time intervalls but is it also as important when the system is designed to "catch the big moves", i.e. with daily/weekly data?


Also how many percent slippage should the system be tested with, in the case of it being important to consider? (daily/weekly) (Or points, I'm using metastock)



And I guess that different brokers have different slippage, and that brokers with less slippage charge more in commission. Does it pay to choose a broker with less slippage but with more slippage? I guess it's a question of position size as well...?

And one more thing, would it be effective to use limit orders in order to avoid slippage? Or would it just mean sometimes order wouldn't be filled?

 

[expensif]

would $0.03 be alright?
What numbers are you using?

 

[Directional]

are you talking in stocks or futures?

if futures as a rule of thumb you should add 1 tick of slippage per side with a market, per trade when backtesting, assuming a liquid market like the emini's or the bund.

stocks depends on the exchange and the stock. If you're talking NYSE then prepare to be bummed by the specialist on every trade vs Nasdaq stocks. And obviously the slippage on GOOG is not going to compare to the slippage on a thinly traded penny stock.

 

[expensif]

are you talking in stocks or futures?

if futures as a rule of thumb you should add 1 tick of slippage per side with a market, per trade when backtesting, assuming a liquid market like the emini's or the bund.

stocks depends on the exchange and the stock. If you're talking NYSE then prepare to be bummed by the specialist on every trade vs Nasdaq stocks. And obviously the slippage on GOOG is not going to compare to the slippage on a thinly traded penny stock.

I'm mainly talking about stocks, but I'm also interested in forex and futures.

So the more volume the less slippage?

Could you please elaborate on the NYSE? I didn't really understand that.

How about european/asian stocks then?

 

[Directional]

NYSE traded stocks currently trade through a specialist - a person who has a license to take your money as he is able to act as intermediary in the supposed interest of improving liquidity. What this usually relates to is slow fills with big slippage as he takes as many ticks as possible out of the middle for his own pocket.

You can normally get a feel for the sort of slippage you might get by looking at the market depth of a stock. If the prices are all populated and quite deep then you might not get much/any slip at all - if there are lots of prices with no bid/offer at all, and then only for 100 lots you're going to find sinking 5000 shares to be a bit of a problem.