Tips on How To Trade Large Size - Getting Used to 5k share scalps?

Discussion in 'Risk Management' started by KCalhoun, May 6, 2009.

  1. KCalhoun


    Hi -

    My #1 challenge as a trader isn't making winning trades; it's that I do so usually on small share 50-200 share size trades, dozens a day, which adds up but not as much as I know I am capable of...

    Does anyone who trades large size on higher priced stocks, eg $15-$60/share, over 2k shares/trade, routinely, have any insights as to how to get mentally comfortable pulling the trigger on that much size, knowing every .05 is worth hundreds?

    That's the one remaining barrier to success in my trading, and for all the years I've traded, I still haven't overcome it... I don't mind trading 5k shares of some cheap fifty cent stock since the downside isn't much... but taking stops of $100 in pursuit of wins of $500+ isn't something I'm comfortable with yet.

    (and when I play blackjack at casinos I play the $5-$10/hand tables too - same issue, fwiw)... I've made hundreds of trades a day, and am good at it, using IB/esignal, but I don't feel comfortable trading large size on higher priced stocks. It's driving me nuts, because that's the last page I need to turn, to make this all work for big $. Any ideas?



    p.s. I should probably talk to a market maker, or at least one of those 26-year old world poker champs who bets 50k hands, for some insights too.
  2. in a casino once you loose your money you have to get up there is a limit in how much you can loose.
    But in trading the market can take everything from you and also put you in ( - )
  3. Just do it, gradually. I'm the wrong person to talk to since I have the opposite problem (I size up too much too easily, and need to constantly focus on controlling my urges to take risk), but eventually you'll just start mashing shares. The biggest piece of advice is: ignore the P/L, don't LOOK at it, and force yourself to take 1000 more shares every time. Give yourself a week.

    What is holding you back is a fear of losing too much money, a fear of the worst case. you need to mentally rehearse yourself of walking through the worst case scenario, realizing it's not that bad. If you're averaging 1500 shares/trade, and are afraid of doing 2000 shares/trade, ask yourself how bad it really could be. Take your worst 5 day period in the last year, and imagine that with 1500 shares, because of the extra slippage, the losses aren't just 33% bigger but instead 50% bigger than that worst 5 day period. If the amount you'd lose won't kill you, you may realize it's not that bad. If you accept that the worst case isn't so bad, you can put yourself in a position to gradually size up.

    You have to keep pushing the envelop as long as your trading is hot. If you go cold, stop. I always learned to stop by taking a blow up. I've taken a 12k loss on 60k shares of BAC, that was the point where I stopped going over 15k shares. While my trading hasn't been too hot lately, 5k shares is nonetheless a joke to me. It's not because I'm a baller - I've just been through punching in and out a million times. My P/L is more volatile than the guy who trades only 1500 shares and makes $1k/day... but I will go up $3k or $4k by 10:00 sometimes, whereas the guy trading 1500 shares rarely will, unless he's trading BIDU or CME.
  4. CET


    The longer route is to slowly scale up, and doing it this way should help with your tolerance for taking the larger losses. The short route is to focus entirely on the proper execution of the trade and forget about the loss. At some point your frustration of missing $500+ trades should make you get over taking a $100 loss. If you can't accept 5 to 1 r/r, then what do you want? The key is to focus on the trade, not the loss. Just do it.
  5. Eleanor


    But what about the mechanics of trading larger size? Can you lift 10K of say BAC the same as 500 shares of FSLR?
  6. I agree, you it. Make yourself uncomfortable a couple times by putting on a big postion. If you are confident in your ability to be consistently profitable, just put the trade on. Try to only look at the cents, not the dollars you are up or down in the trade.

    $0.10 is $0.10 with 100 shares or 50,000 shares. This is where your confidence in your ability to trade comes in.

  7. I would adjust accordingly. When you decide you want to trade 5k blocks, doesn't mean you do it on MA. If you are comfortable trading 100 shares on $100+ stocks try 400 or 500. Im hoping the OP can see L2 quotes and can adjust his size according to liquidity.
  8. There's always 10k on the inside on BAC, rarely 500 on the inside on FSLR?
  9. Nexen


    I don't speak from experience as I trade very little size but I suppose the answer to your question is that gradual moderation is the key to everything.

  10. KCalhoun


    thanks all -- good points ... I like the one you said about don't look at the P&L, that's the main thing I suppose, is constantly monitoring every single dollar to gauge being up or down; I scalp with usually .04 - .1 max stops and looking to get .3-.5 on wins .. using IB ...

    and that's a point too about size on the inside, why I prefer trading stocks w/at least 10-15k / minute share volume for 200-500 share size scalps; more size needed for larger 2k+ positions, for fast fills...

    one thing I'm doing a lot more is scaling into a position, putting on a small share test trade, if/when it flips green, I add to it, tighten in a trailing stop (or like CTIC/HGSI I was trading today on the spikes, manually tape reading for the exits)... but that's still, start with 100 shares, add another 100 if it goes green, repeat another time or two, then exit as soon as it flips back .05... I'm a net profitable trader, but not making large money at it (goal is $30-$50K net months); so it's a "scale up" challenge. Having $500-$3K days for the winning days, and a few hundred down on red days, isn't going to get me where I want to be, and that's where I've been stuck for years.

    Will also try out higher priced (but wider spread) ones, eg PCLN BIDU GOOG CME etc. A favorite from today was PRU, also ZION.

    I'll try out what you've all talked about, thanks!

    #10     May 7, 2009