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8

We cannot give you a relative bid-ask spread that would make sense. The reason for that is that it really depends on several parameters: The type of financial asset you invest in (futures, funds, index, options, ...) The period during which you're trading (I think the liquidity in markets hasn't been the same over time). If you trade intraday, it depends ...


4

When I simulate, I can usually narrow my trades down to the minute. So I set my Open price at the HIGHEST price for the minute, and my close price to the LOWEST price for the minute. The goals is to be as conservative as possible. You don't want to go live and find that you were too optimistic in your fills. If you cannot narrow it down to smaller than a ...


4

Trading through an ECN is a good idea, FXALL is probably a bad choice since they have such a small market share. Currenex and Hotspot are both better. EBS (in EUR, JPY, and CHF) and Reuters (in GBP, AUD, CAD) have the largest market shares, but they both are expensive to set up and require monthly fees regardless of how much you trade, their liquidity in ...


3

You've got your calculation of the spread wrong, for what you're trying to do. Looking at the spot prices: SGD = USD 0.8, MXN = USD 0.077, NOK = USD 0.16. So in descending order they are SGD, NOK, MXN. The order of levels on your chart is SGD, NOK, MXN. INR vs CHF is the same: CHF = USD 1.1, INR = USD 0.017, so you get a larger spread for CHF in dollar ...


3

For a thesis, it makes sense just to assume a range of fixed costs (e.g. 0.5%, 1%, 2%) and look how this affects your optimal portfolio and overall profitability. Fees for large institutional investors usually don't represent much of the trading costs. Most of the costs come from liquidity (bid-ask spread you have to pay) and market impact (how much your ...


3

Your aggregator should be coding not just to the FIX feeds but the specialized protocols. FIX just gives the bare minimum. For example, Hotspot's FIX certainly works but is throttled and doesn't have the full market data detail. You need their Itch. For Currenex, you need their Itch and Ouch. Your aggregator provider should also give impartial advice ...


3

For the brokerage fee, consider coding a system that calculates the fees for several brokerages (so that you can compare brokerages). For the slippage (and other issues), consider coding that in as well. Adjust prices based on the slippage percentage. Once you do that, you can vary the slippage and determine how much slippage will break your algo.


3

Other answers all give helpful advice, but none actually answer your question, so I will try. First off, backtesting based on close is reasonable only as a poor-man's first approximation, and before committing serious capital I would recommend collecting some higher frequency data. Having said that, it is actually quite common to investigate ideas quickly ...


2

The bid/offer spread is informative about a narrow range of transaction sizes, i.e. the quote depth. E.g. if we see a bid/offer of 99/101 with quantities of 1000/1500 shares respectively then we know that doing a trade to sell upto 1000 shares will get an execution of 99 and doing a trade to buy upto 1500 will get an execution of 101. But the trades that ...


2

We discussed the validity of using bid-ask spreads as transaction costs in this post. Essentially the bid-ask spread represents the cost of liquidity which can be seen only as part of the transaction cost you will have to pay in live trading. There are a lot of things to be considered if you want to include transaction cost in your backtest. The main ...


2

I'm not really sure what your question is, you appear to answer it yourself... If I'm understanding you correctly you are making 2 transactions at 0.6% cost, so then your profit = pred * d_price - pred*(trans) - pred/(1+d_price)*trans That is just your raw profit minus your transaction costs at your opening and closing prices


2

The cost of forex trading is reflected through the bid-ask spread you pay as a retail client to a broker. period. There spread IS indicative of the cost of trading the pair, AT that specific point in time (and OANDA does not reject your trades or recall trades on any rates they offer at a specific time, up to a specific trade size). So what you are doing ...


1

The reason SGD spreads are higher than MXN is onshore / offshore regulation. The Government of Singapore doesn't like their currency to cross their border outside of specified hours and this controls the liquidity in the pair. There is another currency pair - SGO, or Singapore offshore. Otherwise, IMHO, FXQuantTrader has pretty much answered your questions ...


1

You are right, "exogeneous transaction costs" (transaction taxes, brokerage fees...) are related to illiquidity sources. In the literature, these costs impact prices because investors require compensation for its cost. Empirically, liquidity has been helpful to explain some market facts such that the small firm effect, the equity premium puzzle... Loosely ...


1

Find out yourself? -> why not solving for alpha as a function of the difference between the model delta and your true market impact of past trades and subsequent market impact. You obviously need the accompanying data to run such computation but it should be rather straight forward. From my own research I have not found "stiff" formulae to fit the bill at ...


1

IMO, there is only one satisfactory answer to your question. You must measure the actual total cost of implementation. Spread, slippage, comish. Test what you trade/trade what you test.



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