[FoRK] Forex opportunities and kwatloos?

Jeff Bone <jbone at place.org> on Sun May 13 10:39:37 PDT 2007

On May 13, 2007, at 11:49 AM, Sebastian Hassinger wrote:

>> Reality behind the back-testing mirage:  slippage kills.
>
> Pardon my ignorance, but you perked up my ears - what do you mean by
> slippage in this context?

This is pretty standard trader jargon.  Wikipedia has a reasonable  
definition:

	http://en.wikipedia.org/wiki/Slippage

The bottom line is that execution quality --- whether or not desired  
trades can actually be performed in reality, and (if using market  
orders) at what price --- is notoriously hard to simulate.  This  
leads to significant differences between simulated and actual trading  
behavior that essentially completely erode a trading model's expected  
profitability for many traders.  Cf. any of the standard trading  
texts and resources for more info.  (Also note that "algorithmic  
trading" as mentioned in the "slippage" Wikipedia entry probably  
doesn't mean what you intuitively think it means;  generally, it  
means cost-averaging into and out of positions in various ways,  
perhaps with systematic execution, perhaps not.  The WP entry on  
"algorithmic trading" is a bit broad, as this term is used ---  
loosely and often incorrectly --- in various ways within the  
industry.  The correct interpretation has to be contextual.)

jb


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