Slippage and Same-day StopLoss activation

Slippage and Same-day StopLoss activation

Kiran
2015-05-11 20:42:44

Hi,

I have a system (Buy = <condition> at next bar Open) with Stop Loss activated in the same bar.
If i keep the Stop Loss very tight (e.g. 0.1*ATR(10)), I get very good Annual Return and a low 10% of Winners - this is expected because 90% get stopped out by the tight Stop Loss.
If i add Slippage, the system becomes severely unprofitable.

Question - how is Slippage factored into the profitability? If the Buy Price is adjusted down and Sell Price adjusted up by the % slippage?

If this is the case, the Stop Loss should always be greater than 2x Slippage, to allow room for slippage .. else, every trade will be stopped out.
- Please confirm if my conclusion is correct.

thanks
Kiran

QuantShare
2015-05-12 02:44:07

how is Slippage factored into the profitability? If the Buy Price is adjusted down and Sell Price adjusted up by the % slippage?

The buy price increases and sell the price decreases by the % slippage.
And yes, of course stop loss should be greater than 2x slippage.

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