Top 500 U.S. Stocks by Trading Volume Strategy Execution and Cost Modeling Unvealed

Universe

The top-500-by-volume list is typically derived from all U.S. listed stocks traded on major exchanges, including NYSE and NASDAQ. This ensures comprehensive coverage of liquidity and avoids excluding smaller or niche markets.

Trade Timing

The standard approach for such strategies is to:
- Form the list after the market closes, using end-of-day volume data.
- Buy at the next day’s open and liquidate at that day’s close.
This minimizes overnight risk and aligns with common paper-trading practices. However, if you prefer same-day execution (e.g., using close-to-close trades), this would require access to real-time data and intraday slippage modeling.

Price Type

For P&L calculations, close-to-close pricing is most common, as it reflects the standard settlement price and avoids distortions from overnight gaps. If using open-to-close, ensure consistent timing assumptions (e.g., buying at open and selling at close).

Transaction Costs

Include realistic estimates for accuracy:
- Commissions: $0.005 per share (industry average for retail brokers).
- Slippage: 0.5%–1% of trade value for liquid stocks (adjust based on order size and market depth).
Assuming zero costs may overstate returns, especially for high-turnover strategies.

Final Notes
1. Confirm exchange scope and trade timing before data collection.
2. Use close-to-close pricing unless intraday data is explicitly required.
3. Adjust transaction costs based on your broker’s fee structure and market conditions.
With these parameters, you can proceed to pull historical data and simulate the strategy.