Good slippage parameter for IB FOREX

[mtthwbrnd]

What value of slippage would you use in simulation if planning to use IB to trade FOREX?

I am after a ball park figure here ... for example: 0.1, 1, 5, 10? Is 5 huge? Is 0.1 tiny? Is 1 "reasonable"?

What is a reasonable slippage parameter value and what are absurd values?

The reason I ask is because IB say they charge 0.1bp commission (wow! That's low. But give you the market spreads), but NT requires slippage in ticks. There is no direct translation of basis points to ticks... so I am wondering what values of slippage people are using in this case?

Are these the relevent formulas?

IB cost in $ = (amount traded) * (price in $) * 0.00001

NT cost in $ = (amount traded) * slippage

I guess the "best" value of slippage will depend on the average price of the target currency over the long term.

Of course, if you are working large orders then there will be higher slippage due to market impact etc..., but I am talking here about how to simulate only the 0.1bp cost quoted by IB and let's think about small account and avoid discussion of market impact etc...


Thanks,
Matthew.

[NinjaTrader_Bertrand]

Hi Matthew, I would suggest you look at the spread quoted for your currencies of interest across different liquidity times of day and then use an avg figure as 'slippage' - perhaps IB can help you directly on this by providing avg figures (I know some spot brokerages offer this).

[mtthwbrnd]

Thanks bertrand,

I was hoping that some other NinjaTraders who have used the NT software for backtesting and live FOREX trading would pitch in and share their experience on the slippage parameter. But I will also try to get some figures from IB - although I won't hold be holding breath :-).

[NinjaTrader_Bertrand]

For sure I hope some can share their experience as well, I'm happy when the avg spread does not hit my strategies too hard...

[mtthwbrnd]

What values of slippage are you using?

[NinjaTrader_Bertrand]

I normally calc 3-4 for the majors and 5-6 for more exotic ones.

[adamus]

Hi, just reading this thread and was surprised by the slippage figures you're using. They make the commission (at least at Interactive Brokers) look insignificant!

I don't have any experience trading forex but I have been watching the markets for a while now, as I develop my strategies.

The figures (3 - 4 for majors) are pips, right? I guess they are representative of the spread you see on the pairs?

Do you apply these costs to both entry and exit, or is this total slippage for the trade?

Also wondering what are 'the majors'. I'm planning on trading ten pairs - are these all majors (with respect to slippage you mentioned)?

AUDUSD
EURCHF
EURGBP
EURJPY
EURUSD
GBPJPY
GBPUSD
USDCAD
USDCHF
USDJPY

Thanks in advance and sorry for the deluge of questions.

[NinjaTrader_Bertrand]

Yes those are pips, just my rule of thumb, for EURUSD for example a lot less normally, but that covers me on news events or too optimistic backtests, this would be my total figured in slippage for the trade - if you still see a decent profit factor after calculating those in, you're ok for the next stage...

The majors are normally considered USD, Euro, Yen, Pound and the Swiss Franc, the minors Aus $, Can $ and the NZ $...the rest would the exotics...however most important is checking the avg spread you have and what kind of liquidity is in the 'pool'.

[adamus]

Great. Thanks for the insight, Bertrand.

V. interesting.

One thing I haven't discovered about NT yet, is whether I can record the slippage when I am trading live. Presumably the order price is kept, and the execution price, so after I've made a few hundred trades, I can get a pretty precise idea of what's going on. Is that easy enough to do, or is it a job for exporting data to excel etc?

[NinjaTrader_Bertrand]

adamus, you could compute it live from the strategies while you execute, however the executions are also kept in the Account Performance section for to review and then export to Excel for further analysis.