Positionsize formula

Discussion in 'Trading' started by UMU, Apr 30, 2004.

  1. UMU


    For daytrading stocks with an average daily volume > 1 million, can a formula be formulated for the "right positionsize" if the following data is known:

    AvgDailyVolume for the past 10 days (example: 5 million)
    YesterdaysClosePrice (example: 25.00)
    YesterdaysVolume (eample: 5,250,000)
    Curent Time of day (example: 11:00 AM market time)
    CurrentPrice (example: 24.90)
    CurrentVolume (example: 1,200,000)

    The goal is to find the optimum, ie. the max, Positionsize which under normal conditions (without any surprizes like news etc) and normal market times (ie. after 10:00 AM) will give an easy fill?
    That is: max. how much shares of such a stock are easily tradeable:
    a) with just one limit order?
    b) with just one market order? How much Slippage to expect?
  2. Don't think there's enough info to do more than a complete SWAG - if you're looking for something analytic, you'd probably need something along the lines of an average volume bid and offered within X cents of the current price probably over several days.

    Then you'd have a more or less analytically derived estimate of the # of shares you could fill if you're willing to take a fill (sweep) within that X cents of the current price.