[FoRK] Re: FoRK Digest, Vol 43, Issue 12

Sebastian Hassinger <shassinger at gmail.com> on Sun May 13 15:02:07 PDT 2007

> ---------- Forwarded message ----------
> From: Jeff Bone <jbone at place.org>
> To: Friends of Rohit Khare <fork at xent.com>
> Date: Sun, 13 May 2007 12:39:37 -0500
> Subject: Re: [FoRK] Forex opportunities and kwatloos?
>
> 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
>
>
Thanks! and Doy! When oh when will I learn to just RTFW? I want a
firefox plugin that underlines every word on a page (including
TEXTAREAs) that has a wikipedia entry to avoid unnecessary questions
like this.

I assume that slippage is mainly a problem for testing intraday
strategies, not systems based on close prices, yes?

-- 
Sebastian Hassinger
shassinger at gmail.com
cell:     +1.845.893.1377
skype: +1.646.233.3128
efax:    +1.240.363.8895

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