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How does RE choose which Limit Orders to fill in backtest?

Posted By ErkSubasi 6 Years Ago

How does RE choose which Limit Orders to fill in backtest?

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Posted Wednesday July 06 2011
Assume that you have provided limit orders for 100 stocks after close for the next day. But your available cash only allows 10 position to be filled and the next day 50 of those limit orders actually will hit sometime during the day. Also we only have daily bar data, so we don't have a way of knowing the realistic order of executions.

How does RE choose (during backtest) which 10 among those 50 to fill? Is it random or there is some sort of bias there?

Thanks.
Erk
Posted Monday July 11 2011
Any idea??
phg
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Posted Monday July 11 2011
I probably don't have an answer but like you I am interested in understanding the process. I seems to me this is a case where live runnng and simulation could show vastly different results. My take is this:

  • In live results those limit orders are presumably in place when the market opens. Randomly, whichever stock trades first at the limit price will probably get a fill (except in the rare case the market moves away too quickly).
  • In simulation, assuming ticks are not being generated, the fill would occur on the close of the next (daily) bar at the limit if Low is less than or equal to the limit (that's a guess)(and maybe at Open if lower than limit?). My guess is the order is alphabetic by stock symbol? 
  • If ticks are being generated then alphabetically. If supplied, then alphabetically but tick must be at or below limit.

I'm sure this is not quite right, but I am going to learn a lot from the corrections that are offered [grin].

-Pete

See also Yahoo group about applying RE.

Posted Tuesday July 12 2011
Hi Pete,

Thanks for the comment. I am with you on points you mentioned, I was making pretty much the same assumptions.
Since we haven't heard anything from the developers, I guess doing some controlled experiments is only way to test our hyphothesis.
I let you know, once I find something.

Cheers,
Erk
phg
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Posted Tuesday July 12 2011
Hi Erk,

Some controlled experiments sounds like a good idea. I'll be interested in what you find.

(My guess is the developers may have taken some vacation? [grin])

-Pete

See also Yahoo group about applying RE.

Posted Sunday July 24 2011
Erk,

The developers may have more to add but the following topic should answer your question: http://www.rightedgesystems.com/forums/Topic3632-13-4.aspx?Highlight=position+priority

Duane


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