What are your spread and volume cutoffs?

Discussion in 'Risk Management' started by rmiller3, Feb 5, 2009.

  1. rmiller3


    While it's fairly easy to create a strategy that backtests well on stocks with low volume and wide spreads, I am very doubtful that actual trading results would be nearly as good, especially as amounts of capital over 100k were deployed. I trade short term (10min), quantitative strategies.

    On the other hand, when looking at liquid stocks, it's difficult to develop good strategies. For example, in looking at stocks that trade 5 mil shares/day with penny spreads, it's been extremely hard to find effective strategies. All the strategies that I have that have over 60% win rate (with 1% gain =success) produce no more than 1-3 trades every 5 days.
    Is that a tradeable strategy?

    Can other traders out there share their stories with me about trading stocks that have thin volume and large spreads? What cutoffs do you use for spread and volume (shares/day) and why?