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I'm relative new to this, so I might be asking something that doesn't make sense. Here is my scenario:

I have intraday day at 1 minute intervals. This data has ohlc data and I want to compute for any given interval what the likely sell price would be. I could just assume the worst case and take the low price, but I'm assuming there is something a little more accurate than that.

I get that there is no way to accurately predict what the sell price would be, since an actual order potentially changes the outcome. I just want to know if there is a best practice for predicting what the sell price would be if I tried to execute an order on a given interval using historical data.

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  • $\begingroup$ Perhaps calculating the sell price by finding the average price between the High and the Low for the day or since you have 1-minute intervals you can find the Low for say the last 15 minutes @smacbeth $\endgroup$ – Rime Oct 7 '15 at 18:37
  • $\begingroup$ To start with, if you get a signal on a tick, backtest your trading strategy on the NEXT tick... $\endgroup$ – Sergey Bushmanov Oct 12 '15 at 22:54
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It sounds like you are trying to backtest a strategy and want to simulate actual trading conditions.

If this is the case, I make the suggestion that liquidity concerns are of more relevance than nailing a hypothetical order price in a 1-minute interval. If you're really concerned about the price, you could simply average the prices. Note that this is mathematically equivalent to weighing each value at 25%.

You could get more industrious and estimate the variance within the interval and make a guess about what that says about the hypothetical price, but you would need to verify that assumption empirically, anyways. To me that sounds like a lot of unnecessary work.

When you live-test a strategy there are many variables that are present that are not easily modeled in a backtest. So to really work at resolving just one (that is minor IMO) is perhaps not the best use of your energy.

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It probably depends on the liquidity of your asset and the size of the sell order: if you want to trade a heavily traded [and thus liquid] ETF such as SPY for example, your sell order would probably fill almost instantly - unless it is a very big order. In that case, obtaining second or tick data would remove most uncertainty from the question.

However, if the asset is not liquid and/or a very large order is sent, the sell would certainly be filled around the low [and yes, possibly lower].

Finally, lacking any additional information, I would either use the Close price, which usually is representative of the time period, or the low, as a [proxy] worst-case scenario [keeping in mind that it is not exactly worst-case].

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