Sizing a limit order

Discussion in 'Automated Trading' started by EliteTraderNYC, Nov 5, 2012.

  1. Hey guys, I'm designing an automated trading system, however, what would be a good way to avoid submitting orders that influence the market price too much? Any formula for position size? I'm currently examining daily trading volume, but what else would be a good rule of thumb?
  2. There are a number of formulas for estimating the market impact of your orders. Gatheral's is a good one. Google "Gatheral market impact" and a dumbed-down pdf slideshow will be one of the top couple of links. It is about two mb in size, so too big for me to attach to this reply.
  3. If you reach a trading limit, then you can think about this.

    For stocks, my trading limint is 100,000 shares. This happens because of the Universe in which I trade. you can review that criteria.

    when I am exiting I do partial fills at a rate of 10% of the cummulative volume AND I only trade in blocks the size of the blocks on the tape. this means, ordinarily it takes me about 30 fills to exit and 20 fills to enter.

    For commodities, I only permit my self to trade at 5 times the market capacity. My trades look like being at a gas pump and filling the tank. You cannot read the fills as they stream into the window.

    In commodities, the market capacity varies as the RTH's proceed.

    I NEVER use any type of order except a market order. When the event comes that signals a reversal, the mathematical function from which the signal eminates is in charge.

    I have all possible functions categorized as sub-sets as a trend proceeds, the categories follow a sequence of events. Each has signal(s). I call this phenomena an Order Of Events (OOE) and I name what is coming next as What Must Came Next (WMCN).

    I feel very fortunate that people size their limit orders as entities. Almost all of these participants fail the regard other participant's limit orders.

    Being able to depend upon this phenomena is very important to me. Perhaps you have noticed what the consquence is for us who trade as the minority.

    The minority changes sides of the market, when an insurmountable number of limit orders becomes BEST____ in notation.

    I have about 10 to 12 leading indicators of price. This means, for me, I have planty of time to call and carve turns.

    elsewhere there is a thread on boxing where those have not boxed are commenting. I quit boxing because I hurt someone badly. It was unfair for me to compete.

    It trading there is not such thing a competition. Price change is available to anyone who wishes to take advantage of the continuing opportunity. There is a very small minority in trading.

    You only need three rules to automate all of stock trading. Search my one pager.

    Thr rules are:

    1. Wait during Volume less than 0.25 of 65day average of volume.

    2. enter when volume is greater than 0.25 and less than 0.65 of 65 day average of volume after a period of equation1.

    3. exit when volume is less than 1.65 of 65 day average of volume.

    the Sharpe Ratio, when using my Universe criteria you searched, is over 60.

    Under these rules, do not worry about market influences. You will be frontrunning and, as a consequnce, your entry will be "pushed" by the herd. your exit will be a little early, so cross over into another stock that will be "pushed".
  4. Thanks, Jack Hershey, that's a hell of a lot of shares for a trading position. Do you publish a book on the subject?
  5. lindq


    LOL. Don't take him seriously. He's the site comedian.
  6. My share limit is based upon my Universe selection.

    To make money it is best to trade high volatility quality stocks.

    So a compromise is reached by trading off some things for others.

    As you can see it leads to the fact that I am held in high regard as a comedian in some quarters.

    All of us have many facets. It is wonderful that any one of them could appeal to almost anyone.

    I am well published. But I am an amateur in trading and investing. So I do not plublish in this field. Probably, I am one of the few amateurs who has been seriously investigated by government regulators. They found, after careful study, that I was a comedian who had played jokes on them that they did not understand, either.