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docs/engine/transaction-costs.mdx

Slippage and Commission

How QuantJourney applies transaction costs in weight mode and order mode.

Costs exist in both execution paths, but the mechanics differ.

Sourcebacktester/execution/slippage.py + backtester/execution/commission.py + backtester/core.py
LayerCost model
ModeWeights and orders
Inputturnover in weight mode; fills in order mode
Outputnet returns, fill prices, commission and blotter costs
Primary APIslippage_model=..., commission_scheme=...
Main caveatWeight-mode costs are turnover-based; order-mode costs are per fill.

Engine Contract

Weight mode models costs at the portfolio turnover level. Order mode models costs at the fill level after the theoretical price is selected.

WEIGHT MODE actual weight change on rebalance day -> turnover -> bps cost -> net return ORDER MODE theoretical fill price -> slippage model -> commission model -> fill record

Level 1: Order Mode With Slippage And Commission

Configure order-mode costs
python
from backtester.execution import FixedBpsSlippage, PerShareCommission

strategy = MyOrderStrategy(
    ...,
    execution_mode="orders",
    slippage_model=FixedBpsSlippage(bps=5.0),
    commission_scheme=PerShareCommission(
        cost_per_share=0.005,
        min_per_order=1.0,
    ),
)

Level 2: Use Market Impact For Larger Orders

Market-impact slippage
python
from backtester.execution import MarketImpactSlippage, FixedBpsCommission

strategy = MyOrderStrategy(
    ...,
    execution_mode="orders",
    slippage_model=MarketImpactSlippage(
        sigma_daily=0.02,
        adv=1_000_000,
        eta=0.10,
    ),
    commission_scheme=FixedBpsCommission(bps=1.0),
)

Level 3: Weight Mode Cost Interpretation

In weight mode, transaction cost is charged on rebalance-day turnover. It is not a fill-by-fill simulation.

text
turnover = abs(actual_weights.diff()).sum(axis=1)
transaction_cost_pct = turnover * TRANSACTION_COST_BPS
net_returns = portfolio_returns - transaction_cost_pct

Failure Modes

  • Comparing weight-mode cost output to order-mode fill cost without accounting for different mechanics.
  • Setting zero costs while testing high-turnover systems.
  • Treating limit orders as free execution.
  • Forgetting that slippage is applied after the theoretical bar price.
  • Ignoring minimum ticket commission for small orders.

Audit Checklist

  • In weight mode, inspect turnover and rebalance flags.
  • In order mode, inspect each fill's price, slippage and commission.
  • Compare gross and net returns.
  • Stress test bps assumptions.
  • For illiquid assets, prefer conservative slippage or market-impact assumptions.