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Custom Slippage: Modeling Transaction Costs for Algorithmic Strategies
Dan Dunn
posted Jun 20, 2013

Last month Tom Bok gave a informative and fascinating presentation about modeling transaction costs in algorithms at our Boston Algorithmic Finance Meetup.

We were inspired by his presentation to expand the transaction cost modeling in our backtester. Quantopian already had a couple of adjustable slippage models, a volume-based slippage model and a fixed slippage model. Now, it supports any transaction model you'd like to think of. With our custom slippage feature, you can code your own slippage model.

Click Clone Algorithm below, and then press the Build button to run the backtest. You can see the orders being placed at price x, the order being executed at price y, and the slippage-adjusted final price z. Then, you can edit the model yourself. For more information, check out the help documentation.

If you're interested in learning more about modeling transaction costs, we've scheduled a webinar with Tom for June 26 at 2PM EDT. The webinar will be a Q&A based on this presentation. Bring your modeling questions to the webinar, and Tom will answer any questions you have. Please RSVP.

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

1 response
Darth Xanther
Sep 29, 2016

Hello Quants,

Modeling is a useful tool IF you have a general idea of what inputs should resemble and what outcome should be expected (this can help you detect false positives/negatives). My question to the Quantopian community is directed towards those who have traded live algorithms. How did your expected algorithm slippage meet up with your observations once you went live with an algorithm? If you have an algo live trading SPY, QQQ, VXX, XIV, DIA, IWM; would you think that a set_slippage(slippage.FixedSlippage(spread=x.xx)) where x.xx is set to 0.02 is adequate or would you recommend something closer to 0.04? How has going live changed your view of slippage? Any shared info/personal experience you think would be pertinent on the subject of slippage would be appreciated.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.