Netting transactions in quantstrat

Question

Let's say I have a strategy with multiple rules that generates multiple orders on the same symbol at the same timestamp. For example, on 2012-05-23 one rule might buy 10 shares of IBM while another rule sells 5 shares of IBM. In production, a reasonable system would use netting and execute one order to buy 5 shares, rather than one order to buy 10 shares and another order to sell 5 shares.

Is there a way to get this behaviour in quantstrat? From my experiments, quantstrat does not do netting, and for example will add transaction fees for both opposing orders as if two separate orders were executed.

If quantstrat cannot net orders then it should still be possible to obtain the desired PnL in backtesting by using a custom TxnFees function. If this is the correct way to go, how would one go about defining a custom function to net the transaction fees?

Answer 1

A 'reasonable system' would likely do no such thing. My experience of simultaneous execution on tick data is basically zero for aggressive orders.

On bar data, yes, internal netting would make sense, and would be handled by a production order management system. Or, for example, internalizing resting internal limit orders against other signals asking for aggressive orders on the other side, or netting positions. Does any investor of non-trivial size use bar data?

That seems to miss the point of what quantstrat is for. You are looking to figure out (in research) some strategy that makes good predictions and evaluate the quality of those predictions by writing a backtest.

Backtests aren't reality.

Further, netting would completely muddle any ability to figure out if your signal process has predictive power.

The account in blotter will net P&L automatically, so it will have the same result as your order netting, in the absence of fees. So I don't think you would need a separate TxnFees function to understand the possible impact of netting, pre-fees.