shares trading

Discussion in 'Risk Management' started by clarodina, Mar 13, 2009.

  1. Have three questions abt how many shares to buy for a stock

    1) When backtesting a system on stock rather than on futures, there is a different as stock would trade on a different range like from $1 to $30. If just input a std number of shares to buy like 1000 shares than the figures from backtest are not normalized. when a stock is at $1 than number of share would definitly more than when the stock is trading at $30. The usual % money management model does not seems to fit to decide how much to buy. Any pointer?

    2) The above problem would have another problem that is impossible to input a std commission in the backtesting when the broker commission is calculated as % on the trade value. Commission would varies depending on the stock price * number of shares.

    3) Abt the closing price, does the closing price usually the offer or the bid price?
  2. 1. Use variable shares based on net equity

    2. Porgram that or use a better backtesting platform.

    3. It is the setlement price. Every exchange has different rules.

    4. Backtesting is for geeks
  3. Some possibilities:

    1) Use variable shares based on net equity *and* the stock's volatility. Obviously more volatile stocks are more risky. If your goal is to equalize risk, you need to take the stock's volatility into account.

    2) Where's your initial stop? Size the position in shares based on where the stop is. i.e. subtract the entry and stop prices and divide your max risk by that difference. Your max risk would be a fixed fraction of your net equity, say 1% or whatever.
  4. Know all the fix fraction net equity and using these to calculate the num of shares but if the broker charges a minimum of says $25 or 0.2% than things changes. If the stock is $3 and trader buy and sell 1000 shares this would not possible to cover the minimum of $25. However is the stock price is $15 than the 1000 shares would possible to cover the $25 commission minimum. If fx fraction tells you to buy 1000 shares at $3 you should not buy cos that would not cover the minimum. At each price level the stock trade $4 $5 $6 there is a certain minimum number of shares to buy and sell in order to cover minimum commission. Not that straight forward to to use a % on net equity and calculate the num of shares.