I was just curious as to large trader's takes on true liquidity. I have a filter for my screens, I only trade issues with a 50 day volume EMA of half a million shares or higher. My time frame is a little broader than the typical daytraders, anywhere from 30 minutes to 48 hours- so I don't need a ton of leverage as I am not going for pennies. I was just kind of looking ahead and wondering how long it would be before size ran me into problems. With 50 basis points of planned risk per trade and typical risk of 40 cents to a buck factored into those bps', it's a while before I start feeling bulky- but I guess I was just looking for anecdotes, rough observations etc. Jaan you seem to have felt this size cap, what kind of adjustments do you guys plan to make, lower your size, cap your funds, find new strategies etc. or just grit your teeth and take a lower payout?
i should add i meant to say it seems jaan has felt it most directly from what his post said, not that he's been only one i aspire to being big enough for size problems- the type of problem i want to have as soon as possible
size is relative. like I wrote, it's very easy to be too big if you trade low volume stocks. So it's always a choice. Also, depending on your style (time in the market). Darkhorse, with your timegrame and profile, I don't think you are about time to have the problem You can't have a volume higher than a majority of the average volume of your time frame. it's that simple. thus, the longer the time frame and the more volume the instrument the less likely you would hit a limit because of size. I am not making your question trivial. On the other hand, it is very important to always know the limits (or domain of validity) for a trading method. I myself only hit size limits when trading very very short term (had to give up that nice system). For what I do now, I don't think many, would have a problem with size. tntneo
currently we just try to keep the size at optimum -- after big hits we lower our size and vice versa. our system still has a long way to go to cover the development cost, so it will be a while before we can continue researching new strategies. - jaan
its definitely still a hypothetical. i'm small enough not to worry 'bout it but big enough for it to be a blip on the long range radar screen p.s. jaan care to elaborate on development costs, i'm curious what research entails at different shops etc., where the r&d cash is mostly spent
hmm, i'm not sure i understand the question. in our case the r&d was done inhouse (i'm a partner in a small codeshop) with time being spent pretty much equally on three things: 1. developing custom tools for historical data analysis and simulation, 2. designing and testing different systems, and 3. developing the actual trading system + monitoring and improving it (especially in the early days someone had to be constantly standby to take over trading should the system fail). about 2 man-years in total. - jaan