Recently, I have been working on a strategy that trades stocks with low dollar turnover. The initial performance was attractive and I was liking the strategy. But there were two issues that I needed to deal with in the backtesting. How much slippage to add to these stocks. The strategy enters and exits on the open and while looking over the trade list, I noticed some trades entered at the low of the day and exited at the high of the day. From my trading, I knew this would not be a realistic price. Should these cases get extra slippage? What follows is how I try to account for these issues.
Click here for the spreadsheet.
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