Measuring and avoiding slippage

摘要

System traders prefer to focus on the core of their strategies - entry and exit order logic. As such, an important but often-neglected factor in system development, backtesting and live trading is slippage. Slippage by itself can break an otherwise profitable trading system. Most momentum strategies, such as trend-following, get in and out of positions in the direction of the price momentum. This makes them especially susceptible to the negative effects of slippage. Slippage simply is the difference between a theoretical entry price and the actual fill price. It can be measured in several ways (ticks, points, dollars, etc.). We'll address slippage from a relative point of view by measuring it in percentage terms compared to the range of the price bar.