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How does a futures trader determine the upper limit for order sizes for day trading? For example, I presume the ES would take an order for 100 contracts without the slightest bump, but that gold or oil would require much smaller orders, and silver even smaller. Is it all trial and error, or are there simple rules/guidelines?
Can you help answer these questions from other members on NexusFi?
Take a look at the order ladder at various times per day, or at a minimum at the current bid and ask sizes. This will give you at least some idea of market size.
The upper limit, then, really depends on how much slippage you can endure.
The question is how long you want to hold your position. If you are a swing trader, you can use order execution algorithms to enter the market, see impact and liquidity driven algorithms.
If you wish to scalp, you need to have a look at the order book before entering a position. The depth of the order book depends on the time of the day. You can collect level 2 data and run a few statistics on each instrument to get an estimate of the typical order book depth at a given time of the day.
Keep in mind that the numbers on the order ladder are spurious/fictitious. Divide by 2, at least, to get what levels actually move the market after dummy orders are pulled.
If your asking questions like that, you really shouldn't be trading anymore than a 2 lot. So its something you don't have to think about. when your looking to trade more size you will know the answer.
Your time and effort will be better spent focusing on other stuff...
