# How to estimate probable seeling pricegiven OHLC data for backtesting?

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.

• 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 – Rime Oct 7 '15 at 18:37
• To start with, if you get a signal on a tick, backtest your trading strategy on the NEXT tick... – Sergey Bushmanov Oct 12 '15 at 22:54

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.

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].