Daily Backtests Can Misjudge Limit-Locked Sell Orders
Summary
The document explains a limitation in a Chinese equities platform’s daily backtest matching: it assumes a stock at its limit-down price cannot be sold. That assumption can miss cases where buy orders remain queued at the limit price, as in the example of a planned sale that the backtest rejected despite reported buy-side demand after the close.
The suggested workaround is to use a VWAP or TWAP execution point instead of a closing-price order; the example proposes an earlier VWAP point for a late-session sale. The platform’s daily Trade module cannot assess this queue condition. The discussion points to intraday execution through its HFTrade module as a possible alternative, while noting that an algorithmic-order interface was only planned. It provides no test of the workaround or evidence that it guarantees a fill, so users must account for execution uncertainty.
Key ideas
- Daily backtests may reject sales at limit-down prices by default.
- A queued buy order at the limit price can make an actual sale possible even when the daily simulator rejects it.
- Using VWAP or TWAP execution points is suggested as a workaround for close-price orders.
- The described daily matching engine cannot evaluate intraday order queues, and the proposed alternatives have no demonstrated results in the document.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.