Top 500 U.S. Stocks Vie for Daily Alpha in High-Velocity Trading Strategy with 0.02% Costs

Market Universe

U.S. listed common stocks on the New York Stock Exchange (NYSE) and NASDAQ are the intended market universe. This includes all common equities traded on these exchanges, excluding over-the-counter (OTC) or international listings unless specified.

Selection Timestamp

The "top-500 by trading volume" list should be formed using the prior trading day’s volume. The basket is executed as follows:
- Buy at the next trading day’s open (e.g., if volume is calculated on Day N, the basket is bought at Day N+1’s open price).
- Liquidated at the same day’s close (i.e., held for a single trading day).
This approach ensures the strategy reacts to the most recent volume data while avoiding lookahead bias.

Re-balancing Days

The strategy should run every U.S. exchange trading day from 2022-01-03 to 2025-10-14 (inclusive). This period includes all market holidays and excludes weekends and U.S. market holidays.

Transaction Costs / Slippage

Assume 1 basis point (0.01%) per transaction for both buy and sell legs (totaling 2 bps per round-trip trade). This accounts for realistic slippage and commission costs for liquid U.S. equities.

Execution Summary

To implement the back-test:
1. Data Pulls
- Use end-of-day volume data for the prior trading day to rank stocks.
- Fetch open and close prices for the selected basket on the execution day.
2. Basket Construction
- Select the top 500 stocks by trading volume from the NYSE and NASDAQ.
- Equal-weight the basket (1/500 per stock) or use another specified weighting method.
3. Timing
- Execute purchases at the next day’s open price and sales at the same day’s close price.
4. Costs
- Apply 0.01% transaction costs to both buy and sell legs.

This configuration ensures the strategy is tested under realistic conditions, with clear rules for data timing, execution, and cost modeling. Let me know if further refinements are needed.