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Which come first: High or Low? #996

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houseofai asked this question in Q&A
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When processing a new bar, how does Backtesting decide which price from High/Low comes first?

TradingView's Strategy Tester uses the closest price to the Open price to decide which one comes first. Strategies that use small triggers (small TP/SL), can cause significant inaccuracies in the results.

To illustrate the issue, let's say that my strategy has a Long position with a Stoploss at 10$ and a Takeprofit at 20$. A new bar comes, with an Open price of 15$, a High price of 25$, and a Low price of 5$. The High price triggers the TP, and the Low price triggers the SL. So depending on which tick comes first, it can change the result.
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Replies: 3 comments

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Just come by issue #119. I believe the comment made by @rokups makes things closer to reality.

This issue popup when Entry, SL, or TP are close enough to trigger on the same bar - and which happens more often using high time frames.

To add on these two comments:

  • If trade entry and take-profit prices are within wicks - close trade in-profit.
  • If trade entry and take-profit are within same candle - close trade in-profit only when candle matches trade direction (green candle for longs, red candle for shorts).

I would go for a more pessimistic approach and assume that:

  • If there is Entry and TP on the same bar: hit the Entry last and don't hit TP.
  • If there is Entry and SL on the same bar: hit the Entry and then the SL.
  • If there is Entry, TP, and SL on the same bar: hit the Entry and then the SL.
  • If there is TP and SL on the same bar: hit the SL
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question SL/TP hit on the same bar as trade opened refers to the same problem
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To illustrate the issue

Do you have code that triggers the issue?

See #119 (comment).

But in other regards, the framework's policy is already pessimistic, i.e. SL-first:

def _open_trade(self, price: float, size: int,
sl: Optional[float], tp: Optional[float], time_index: int, tag):
trade = Trade(self, size, price, time_index, tag)
self.trades.append(trade)
# Create SL/TP (bracket) orders.
# Make sure SL order is created first so it gets adversarially processed before TP order
# in case of an ambiguous tie (both hit within a single bar).
# Note, sl/tp orders are inserted at the front of the list, thus order reversed.
if tp:
trade.tp = tp
if sl:
trade.sl = sl
.
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