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Depending on the strategy, Precise Strategy Back Testing can give the user a more realistic emulation during back testing. To back test high frequency strategies like statistical arbitrage, the user may need take into account the historical bid/ask data in addition to the historical trade data.
With Precise Back Testing, the user can load the historical bid data series and the historical ask data series into MultiCharts. MultiCharts will use the ask data series to fill buy market orders , buy stop and buy stop limit orders. Similarly, MultiCharts will use the bid data series to fill sell market orders , sell stop and sell stop limit orders.
Consider a situation where a market order to buy 1 contract and a market order to sell 1 contract are submitted at the same time at the close of a bar. If the user only uses the trade data series, then there is only one price for the close. The back test will show that these two orders were filled at the same price, and the profit/loss is zero. In reality, there's a bid/ask spread. If the price quote doesn’t move suddenly, then these two orders will undoubtedly generate an instantaneous loss due to the bid/ask spread. That's why it’s more precise to back test with a bid data series and an ask data series.