Slippage

-oo0(GoldTrader)

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Now that our dunce has left the building.
Price goes against you, trade with a STOP...obvious isn't it?
Let me bring you a few quotes with referances. First I present Niederhoffer with 25% slippage.
Victor Niederhoffer said:
In statistical terms, I figure I have traded about 2 million contracts, with an average profit of $70 per contract (after slippage of perhaps $20). This average is approximately 700 standard deviations away from randomness. <ref>Niederhoffer, Victor. The Education of a speculator. (1998) p156 ISBN 0471249483</ref>
Very good about randomness not being random.
% risked with potential absolute profit which is, as I say, I direct function of your stop size.
Next we have the obvious that it is unrealistic to expect stop orders to be filled at our stop prices.
However the slippage is much more difficult to quantify. The trader might have a mental image of trading at the prices shown on a computer screen, but in reality he must continuously buy at the offered price and sell at the bid price.

The spread between the bid and offer becomes a very substantial but hidden cost of doing business. In addition, as most of us have learned many times over, it is unrealistic to expect stop orders to be filled at our stop prices. Commodity Traders Club News - Issue 42
Gary Smith likes to test with $250.00 per trade slippage.
Smith Gary said:
A deduction of $100 was taken from each trade for slippage and commission. Personally, I think $200 to $250 per trade for slippage and commission is more reflective of reality in trading the S&P. <ref>Smith, Gary. How I trade for a living (2000) ISBN 0471355143</ref>
Henry Carstens attempts to show what might cause some of the slippage.
Henry Carstens said:
Slippage occurs when you are filled at the ask instead of the bid. If this happens on entry and exit, the total slippage per trade is two ticks. Two ticks can easily wipe out 50% of the profits from a (short term), trading system. <ref>Carstens, Henry. Introduction to Testing Trading Ideas (2007)</ref>http://www.verticalsolutions.com/</ref>
 
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