"Keep after worst case slippage"

Matthew, I’m comparing the “keep after worst case slippage” vs. “keep after real life slippage”. My Island Trader FX trades the Eur/Usd, which is one of the most liquid instruments in the world that has tight spreads the vast majority of the time. The “keep after real life slippage” shows virtually no slippage over the course of 4+ months which is what I would expect for an autotrader using C2. I’m just not sure why there would be such a disparity between the “keep after real life slippage” vs. “keep after worst case slippage”? I can understand a little slippage; however the “keep after worst case slippage” shows a paltry 48%? The average trade length for the system is around 7 hours so it is very reasonable to expect that one would be filled at the stop or profit take with very little slippage when trading one of the majors in the Forex Market. Shouldn’t the “keep after worst case slippage” be somewhat more in line with real life trade data?

The “worst case slippage” essentially shows the relationship between your average trade profit and the average bid/ask spread of the instruments you trade.

It shows how sensitive a system is to slippage, should slippage occur. Obviously if your system is being AutoTraded by real-life subscribers (as yours is), and real-life trade data shows minimal slippage, then a customer examining your system who is thinking about AutoTrading it through a Gen2 or Gen3 broker should probably expect to get similarly favorable results.

On the other hand, the “worst case slippage” might be useful to a customer who says to himself, "Let’s say I wanted to manually trade this system, and I can expect some modest slippage; how much would slippage affect my profit results?"

To take a made-up example (not from your system specifically): If a system averages, say, 9 pips of profit per trade, and it typically trades a pair with a two pip spread, then in the worst case world, you will lose 4 out of 9 pips of your profit to slippage per round turn. Obviously you’d need to be pretty unlucky to get horrible slippage at each turn of your trade, but the idea is to simply provide one more measurement among many to help people understand a system’s sensitivity to various factors.

Thanks for the explaination and example. That is very helpful. Rick