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I am interested in daytrading stocks. I don't want to hold overnight, lest I lose ¼ of my account. Netflix last night was an example. I want to make, perhaps, 1 trade every hour for 1 to 3 different stocks which give me alerts. I am looking for at least 8¢ profit per share up to 25¢/share.
Assuming the stock prices range from $9 to $50, average >= 200,000 shares per day volume, cash account (not margin), account is large enough to accommodate any trade size, ignoring commission fees:
1. In your opinion, what would you say is the optimum trade size? 2. In your opinion, would 1,000 share trades result in bad fills with a lot of slippage?
Can you help answer these questions from other members on NexusFi?
I would limit it based on how much money I have. I would risk only a % of my capital per stock. What that % is, is really up to you. From what I've read, it's better to size things based on amount of capital invested instead of amount of shares bought.
Measure your entry price against your ultimate exit price.
Whatever that difference is denotes your risk tolerance on a per
trade basis. ie; risking $100, differential is .25, then 400 shares.
I'm not 100% sure what you mean by "Cash account could be a problem as some brokers have a 3 day settlement." Could you tell me what you mean by that?
Regarding my first question, I'm trying to figure out if I should change my commission plan with TradeStation from a 1¢ per share basis, up to 500 shares, to a fixed amount per trade. The fixed amount is $10 down to $5 depending on activity.
In terms of trade lot size, would 1,000 share trade lot size be a big foot print? Would I get poor fills with a lot of slippage?
I'm trying to figure out if I should change my commission plan with TradeStation from a 1¢ per share basis, up to 500 shares, to a fixed amount per trade. The fixed amount is $10 down to $5 depending on activity.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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In probability theory and intertemporal portfolio choice, the Kelly criterion, Kelly strategy, Kelly formula, or Kelly bet, is a formula used to determine the optimal size of a series of bets. In most gambling scenarios, and some investing scenarios under some simplifying assumptions, the Kelly strategy will do better than any essentially different strategy in the long run (that is, over a span of time in which the observed fraction of bets that are successful equals the probability that any given bet will be successful). It was described by J. L. Kelly, Jr in 1956.
My understanding is as follows;
Brokers have 3 days to settle your account or pay you for the shares you sell.
If you have $10,000 in your account and buy 10k worth of stock.
Now you have no money in your account.
Then 1 hour later you sell the stock for $10,500.
The broker doesn’t have to settle that trade for 3 days.
So you have no money in your account to buy your next stock.
Some Brokers won’t let you trade until the prior trade is settled.
My question is why wouldn’t you have a margin account?
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
