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Perhaps you might have to "match" Tick data to the best bid/offer to see which price(s) go through... If say the spread is 35.50/36.50 and the tick at that moment is 36.50 then we can consider this to be "buyer initiated" and of course if the tick is 35.50 then it becomes "seller initiated". That is to say if the price is above the average of the current ...


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Backtesting, to me, necessarily involves testing against (realised) history of the securities under question. Wikipedia also seems to support this interpretation. http://en.wikipedia.org/wiki/Backtesting This history of the realised prices, of the securities under question, was generated by a certain pricing "model" or distribution. If you test against a ...


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Have you checked White's "reality test" (White H. A reality check for data snooping. // Econometrica. 2000. № 68. С. 1097–1126.)? Anyway, when you use Monte-Carlo, you always have a variation of "double hypothesis" issue, noted by Fama: first hypothesis is that your model of the market is right, and the second - that trading rule you test (against your ...



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