Run analysis on market orders vs limit orders

[slavakurilyak]

Story

As a data scientist, I want to run analysis for market orders and limit orders, so that I can better understand how slippage affects portfolio in backtesting.

Note

• There is a clear difference between market orders and limit orders:

A market order attempts to buy/sell at the current market price. It buys or sells “right now.” What it does is buys up available sell limit orders sitting on the books. Thus, slippage may occur (where you get a slightly higher price with a buy market order or slightly lower price with a sell market order). In very volatile times, slippage can be substantial. You’ll pay a fee for a market order as a rule of thumb. (Cryptocurrency Facts, 2018)

A limit order places an order on the order book in hopes that it’ll be filled by someone else’s market order. When the market price reaches that price, it’ll buy or sell (AKA “fill”) if there is a buyer or seller. With the exact mechanics of exchanges aside, the basic concept here is that someone else is placing a market order and that a buy or sell will fill your limit order. Limit orders aren’t subject to slippage and sometimes have lower fees than market orders. (Cryptocurrency Facts, 2018)

• Market orders take slippage into account, while limit orders do not.

• Catalyst already supports market orders and limit orders

Thanks

Thanks to @agalea91 for the inspiration