Last Updated on June 19, 2022 by Quantified Trading
Lately, I have done some research trying to develop some new daytrading strategies. I have tested many trading strategies that buy or sell at the open (OPG). The exit has been after two hours or on the close (MOC).
There are two huge advantages to using OPG and MOC compared to exiting during the rest of the trading day, for example, by sending market or limit orders: what you see is what you get, and commissions are lower (this relates to NYSE stocks only)
- There will be no slippage in an OPG trading strategy, compared to your backtests, unless your orders move the market, and that is unlikely unless trading many thousand shares or illiquid stocks. The same goes for MOC trading strategies. And if you move the market, it won’t be much. You will get the opening print and the last print of the day on NYSE. My average slippage is around 0.5 cents per share if I exit one hour into the trading day. If I have in total 10 000 shares in open positions, it will cost me 50 USD to exit the positions in slippage. This adds up over a year!
- Commission rates will be lower because I remove a lot of liquidity when exiting for example one hour into the trading day. In 2012 my total commission rate is .0028 per share traded. Trading solely with MOC instead I save 0.001 per share traded compared to exiting after one hour of trading. Over many years that is a substantial amount of money.
If trading 10 000 shares one way per day on average, this equals 60 USD per day in savings. And 10 000 shares is not much at all. Most daytraders trade a lot more than that.
This is something to think about if you’re day trading.