Small Cap Execution

Discussion in 'Trading' started by candletrader, Mar 21, 2002.

  1. Dearest Brethren,

    It has come to my attention that Small Caps have come back into vogue lately... up to now I have been focused on Nasdaq NMS stocks and NYSE stocks and, dare I say it, been having some success in my endeavors...

    But I would like to widen my universe to include the Small Cap universe... Small Caps are not executable through SuperSoes, and it seems to me that executing small caps is a choice between the old SOES and Selectnet...

    In order to achieve the most rapid of executions, I was wondering if any Brethren could furnish me with their personal experiences of the most efficacious and speedy techniques / routes of execution for Small Cap stocks...

    Sincerely and fraternally.

    Your Brother,
  2. Dearest Brother Candletrader

    I know a someone that trades only NASD small cap and he uses ARCA for execution. He has been using it for as long as it has been around and sitting next to him for a year I never heard a complaint about executions. Second choice he uses ISLD limit orders.
  3. As far as using SOES for SmallCap issues,it's only good for up to 500 shares, and it's optional,not mandatory, for market makers.
  4. I trade a lot of small caps (swingtrading, not daytrading). I have also been making a conscious effort to up my size, as I have been underperforming due to not having my account sufficiently employed. This has caused me real problems with slippage when I want to get out.

    It isn't easy to get rid of 1000 shares in these stocks when they are showing 1x5 size, as they often do. The problem becomes particulartly acute if you trade small caps that have a low price as then you have to have even more shares for an appropriate position size. If you trade smaller positions you have to have more positions to keep your account working. Then you have the problem of managing many positions. It's a real Catch 22 situation. What worked for me with a small five figure account trading a couple of hundred shares is proving more difficult with a large five figure account.

    One option I am considering is to increase the minimum price per share figure in my screening from $10 to $30. Then I will have fewer shares to manage in each position of equivalent size. The other option is to become more pro-active and less reactive in selling, by selling into volume surges. This is of course a standard daytrading technique, but when applied to swingtrading may well lead to premature exit as a swingtrader ideally wants to hold through the smaller retracements but be able to exit easily if they turn into something more serious.

    Regarding execution mechanics I am rather unsophisticated and rely on IB "Best" execution mainly, only worrying about how many shares to let go in each order. I too would appreciate any helpful suggestions in this regard.
  5. ANd I believe that you don't know if the MM of MM's sitting at the inside have elected to be SOESable (unless you check NASDAQTRADER and memorize the MM's who participate for the stock you are trading) This makes it tough to decide how to route your order.....correct?
  6. Yes, I do not believe SOES is a viable option, primarily because of Tier Restrictions... I suppose it boils down to a choice between ECNs (preferred) and Selectnet (in the case of an ECN scarcity)...

    As always, I thank you, my Brethren, for your input...