Post #1185 by platykurtic on the Mechanical Investing board

Investment Strategies / Mechanical Investing ❤

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Isn't the Friction that's relevant the 'difference between the final transaction cost & the price that the backtester (for example GTR1) uses'? That is the difference between the transaction price including fees, taxes etc. & the day's closing price in the case of the GTR1.

That's one of the reasons why I've always favored the MOC (market on close) transaction type at IB for MI work. In that case the friction is essentially IB's fees only x2 which is lower than the traditional 0.4% friction. And of course if one could reliably transact at 'better than the close' pricing then friction could even be negative.

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