Trading large quantities - how to guarantee execution
I am looking at a basic strategy of trading a "biggest mover" of the day. I would be using a large sum of money ($300,00 +), my plan being to get in for just a 1-2% gain, then get out (this being on a stock that is moving say 40% for the day). My concern, especially when I go to sell, is that all of the order is executed and I am not waiting for the shares to become available while I watch the price drop. Is there any means/tactic I can employ to prevent/minimize the likelihood of an order not being filled, especially at this volume. Depending on the price, I could be executing upwards of 20-40,000 shares. Any help is appreciated folks. TIA.
Maybe I didn't understand your question but it looks you are going to trade a big size on a stock very volatile(can move 40% in a day) and you have a problem to close the position at 1/2% profit.
Ok if it is so, just think that if you have this problem in close the position in profit you will have the same and worst when you try to close it in stop. You may have also this problem to enter in position.
Simply you are trading a bigger size than the book allow you....if you can't close in 3/4 price levels ...most likely.
So in my view I would not do that.
The only advice that you may have already considered is to use iceberg orders to reduce at least the impact and visibility of your order on the market(if market support them)
I guess I'm talking just placing a market order at a price that looks good, then watching it for a few ticks (say 1-2%), and then placing another market order to get out. I am concerned that at this volume that I might not be able to have the order executed. Or if it does, it has changed much beyond where I wanted to execute at.
If the instrument is traded very thinly, you will only get your order filled on market. A limit order will only fill a small portion, depending on your luck. Hence, your cost average will be way higher than you may have wanted. You will also likely face the same issue getting out, resulting in a skewed cost average.
Couple this, along with your costs and it will probably make your strategy null and void
I don't mean to de-rail the question, but.. Why trade a 40,000 share stock when you can trade a 50k e-mini future at 0.0016% of the cost/margin in a day trade under the same trade idea/strategy?
I realize some teach the stock trader guys that trading futures is "dangerous" but (IMHO) trading 40k of stock in most markets is much more dangerous then trading ES-Mini in a thick market for the same benefit level.
40k (cash) of APPL stock, at $100 per share = 400 shares
1 dollar of profit on APPL stock = $400
8 contracts of ES emini for day-trade ($4000 margin) according to your idea of scalping, since this is a day trade
8 points x4 easy ticks each = $400
So for $4k you can get into and out of a trade without creating a blimp on anyones radar screen, make more then you could trading a hot stock, and suffer no slippage 'cept for your market orders.
Last edited by Zxeses; September 16th, 2014 at 11:48 PM.
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