Hello everyone!
I have a question in regards to the spread function in automated trade systems.
Firslty I would like to point out Im aware of the unrealistic results with 0 fees and spreads when backtesting!
So to the problem I would like to solve – When I enter a spread of say 3 pips the system will buy at 97 (when my intent is to buy at 100)
If I leave the spread at 0 – what effect will that have on the system going live? I’d rather have the system buy at 100(+spread) than 97
Im findig it a bit hard to describe what I am after – but basically the question is: how does zero spread affect a live system? if the spread in reality is 3 and the buy order is set at 100?
Sorry for a confusing post 🙂
When I enter a spread of say 3 pips
You can only enter a spread during Backtesting … when you do this you are trying to simulate what happens during Live Trading.
If I leave the spread at 0 – what effect will that have on the system going live?
If you leave spread at 0 during Backtesting, you are kidding yourself because when you go Live the broker will be levying a spread on any trade you make.
When I enter a spread of say 3 pips
You can only enter a spread during Backtesting … when you do this you are trying to simulate what happens during Live Trading.
If I leave the spread at 0 – what effect will that have on the system going live?
If you leave spread at 0 during Backtesting, you are kidding yourself because when you go Live the broker will be levying a spread on any trade you make.
Ah yes, well Im not on about the backtesting, I am happy with my system as it it except for the detail that it doesnt execute orders on the correct place – when I have entered a spread of 3 it will excecute an order at for e.g. 97 (instead of 100)
I want the order to be executed on 100, so if I leave the spread on 0 on my live system – will the order excecute at 100?
Ah yes, well Im not on about the backtesting, I am happy with my system as it it except for the detail that it doesnt execute orders on the correct place – when I have entered a spread of 3 it will excecute an order at for e.g. 97 (instead of 100)
I want the order to be executed on 100, so if I leave the spread on 0 on my live system – will the order excecute at 100?
Or am I just being thick? I simply want the order to execute when the ticker reaches for eg. 100, I dont mind the actual cost being 103, as it is now the order execute at when the ticker is at 97 ..
The spread is the difference between the buy and sell price. So with an actual spread of 3 (regardless of what you have entered in your strategy), if your conditions are met at an asking price of 100 then that is what you will pay – but because of the spread your position at the time of opening is only worth 97.
As Grahal said, the spread you enter in your strategy is only for back testing. It has no effect on what happens in real or demo trading where the spread is set by the broker.
does that answer your question? or have i misunderstood?
The spread is the difference between the buy and sell price. So with an actual spread of 3 (regardless of what you have entered in your strategy), if your conditions are met at an asking price of 100 then that is what you will pay – but because of the spread your position at the time of opening is only worth 97.
As Grahal said, the spread you enter in your strategy is only for back testing. It has no effect on what happens in real or demo trading where the spread is set by the broker.
does that answer your question? or have i misunderstood?
It does, I was just being slow.. 🙂 Thx alot!
