Incorporating Slippage Assumption in backtesting | Forex Factory

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Incorporating Slippage Assumption in backtesting

  • #1
  • First Post: Jan 17, 2012 8:16am Jan 17, 2012 8:16am
I am going to do a backtest of an EA and would like to incorporate the slippage assumption in it. What would be a reasonable assumption of the slippage?
Thanks.
  • #2
  • Jan 17, 2012 9:40am Jan 17, 2012 9:40am
Quoting pipsfan
I am going to do a backtest of an EA and would like to incorporate the slippage assumption in it. What would be a reasonable assumption of the slippage?
Thanks.
Which Broker? Also, what times/which sessions are the trades placed? and what order type? Are orders placed during news?
  • #3
  • Jan 17, 2012 9:49am Jan 17, 2012 9:49am
The broker is FXCM. Trading sessions will be London and New York. Order type will be market order. Not during news. Thanks!
  • #4
  • Jan 17, 2012 10:01am Jan 17, 2012 10:01am
Quoting pipsfan
The broker is FXCM. Trading sessions will be London and New York. Order type will be market order. Not during news. Thanks!
Since it is market order, mean slippage per trade will be very little, as over time positive slippage will balance out with negative slippage. For me, i get a mean slippage per market order of negative 0.031 pips (over the last 400 market orders). My execution speed is about 800ms, i trade London + NY, and rarely make market orders at news times. I wouldn't worry too much about slippage for your back testing
  • #5
  • Last Post: Jan 17, 2012 1:52pm Jan 17, 2012 1:52pm
Quoting pipsfan
I am going to do a backtest of an EA and would like to incorporate the slippage assumption in it. What would be a reasonable assumption of the slippage?
Thanks.
I would incorporate at least twice the slippage you normally experience. Why? Cause you will have instances when none of your orders get filled, in a fast market.

However your backtest doesn't know when there is a fast market and when not. So to include these events, we need to spread them out to all the other trades you make.
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