Slippage is it absolute or relative to price?

[emretezel]

Hi Rob,

When setting slippage to new instruments, I know it should be half of bid ask spread, but wanted to ask whether it should be the absolute amount or relative to the price?

Best,
Emre

[robcarver17]

I don't understand the difference. Can you give me an example?

[emretezel]

For example say an instrument bid ask is 200.1 - 200.2, do I enter 0.05 as slippage or 0.00025?

[robcarver17]

0.05 half of 200.1 - 200.2 = 0.1

Out of curiousity, where the hell does 0.00025 come from???

[emretezel]

0.05 / 200

[emretezel]

slippage as a % of price

[robcarver17]

Bad idea. What if the price is zero, or close to it?

[robcarver17]

Do you mean 'in currency terms' or 'in price terms'? If so, the latter.