Backtesting YM Futures with Tick Data
What if your backtest on YM futures looks profitable until you account for the slippage that happens in real micro-contract trading? It's early morning,...
What if your backtest on YM futures looks profitable until you account for the slippage that happens in real micro-contract trading? It's early morning, and while you sleep, a strategy might capture a move, but only if it handles the friction of tick data correctly. Most traders run simulations on 1-minute bars and miss the execution gaps that define success or failure in fast-moving markets like the Dow Jones Industrial Average futures. The core issue with standard bar-based backtests is that they assume perfect fills at open, high, low, or close prices. In reality, YM futures trade on a continuous stream of individual transactions where liquidity varies second by second. When you switch to tick data in NinjaTrader 8, you expose your strategy to the true cost of trading, including spread widening and slippage during news events. This granularity is non-negotiable for scalping strategies that rely on entering within one or two ticks of a signal trigger. Slippage is the difference between the expected price of a trade and the actual execution price. It occurs when market orders are filled at prices worse than anticipated due to rapid price movement or insufficient liquidity.