How to use Execution Simulator
Estimate execution cost in closed form from your order size relative to daily volume: square-root permanent impact, linear temporary impact, half-spread, and a latency-drift band. The page reports slippage in basis points and dollars versus a naive mid-quote fill. It does not model an order book, queue position, or partial fills.
What It Does
Use the calculator with intent
Estimate execution cost in closed form from your order size relative to daily volume: square-root permanent impact, linear temporary impact, half-spread, and a latency-drift band. The page reports slippage in basis points and dollars versus a naive mid-quote fill. It does not model an order book, queue position, or partial fills.
Backtesters whose strategies look great until they hit live markets and slippage eats the edge — and need to bake that slippage into the backtest assumptions.
Interpreting Results
Total slippage in basis points is the headline — the sum of permanent impact, temporary impact, and half-spread. A persistent gap of more than a basis point over the naive mid-quote fill means slippage will eat the strategy's edge; downsize, slow down, or rethink the entry and exit.
Input Steps
Field by field
- 1
Set the order
Set the order: side, order size in shares, and the stock's average daily volume — order size relative to ADV drives the impact.
- 2
Set market conditions
Set the market conditions: bid-ask spread (bps), daily volatility (%), and participation rate (% of volume).
- 3
Set latency
Set latency (ms) and latency jitter to see the drift band, and enter a reference price to convert basis points into dollars.
- 4
Read outputs
Read the cost decomposition: permanent (square-root) impact, temporary (linear) impact, and half-spread, summed to total slippage in bps and dollars. The output is closed-form and deterministic.
- 5
Increase size
Increase order size to find the 'capacity ceiling' where slippage exceeds expected alpha. This is your strategy's practical capacity limit.
Common Scenarios
Use realistic starting points
Small order in liquid name
Order size vs ADV
~0.1%
Daily volatility
low
Total slippage under 1bp. Impact is a rounding error; a naive mid-quote fill is roughly honest here.
Large order in mid-liquid name
Order size vs ADV
~5%
Daily volatility
high
Total slippage 10–30bp, dominated by square-root permanent impact. Split the order or trade slower to cut it.
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FAQ
Questions people ask next
The short answers readers usually want after the first pass.
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