Modeling Order Delays in Moving-Average Backtests

Summary

The document explains how to make a backtest reflect the lag between placing an order and its execution. It uses a five-day and twenty-day moving-average crossover strategy as an example, then describes setting a delay in minutes during strategy initialization. The delay can be calibrated from prior trading experience and also used to model rules that wait after an intraday event before trading.

As evidence, it says that the delayed version of the example strategy earned ten fewer points than the version without a delay when a five-minute lag was applied. This illustrates that execution timing can materially affect simulated results. The comparison is presented without chart data or details about the instrument, test period, costs, or fill assumptions, so it does not establish how large the effect would be for other strategies. The document focuses on the use of a platform function rather than a broader methodology for estimating realistic execution delays.

Key ideas

• Execution delays can be added to a strategy backtest in minutes.
• The example applies a five-minute delay to a moving-average crossover strategy.
• The document reports ten fewer points of return for the delayed example.
• Delay settings can also model waiting after intraday events before entering a trade.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.