What is Slippage?
Slippage is the difference between the price a trader expected when placing an order and the price at which it actually filled.
How it works
It appears when the market moves between the decision and the fill, or when an order is large enough to consume several price levels. It is larger in thin markets and fast moves, and it adds to the commission or spread. For a strategy that trades often, costs and slippage can be the entire difference between a profit and a loss.
What it can't tell you
It is hard to estimate in advance, and a backtest that ignores it will overstate the results of any strategy that trades frequently.
How Tickfloor uses it
Every Tickfloor backtest charges trading costs on each side of every trade.
Does it work as a strategy?
This is a concept more than a trading rule, so there is no single strategy to score. It matters for reading the results below.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is Slippage?
Slippage is the difference between the price a trader expected when placing an order and the price at which it actually filled.
How does Slippage work?
It appears when the market moves between the decision and the fill, or when an order is large enough to consume several price levels. It is larger in thin markets and fast moves, and it adds to the commission or spread. For a strategy that trades often, costs and slippage can be the entire difference between a profit and a loss.
What are the limits of Slippage?
It is hard to estimate in advance, and a backtest that ignores it will overstate the results of any strategy that trades frequently.
How does Tickfloor use Slippage?
Every Tickfloor backtest charges trading costs on each side of every trade.