what is the minimum necessary volume to trade 10k shares ?

Discussion in 'Trading' started by luisHK, Sep 29, 2010.

  1. luisHK



    I'm quite new in the securities market yet besides investing for longer term, I couldn't help buying a couple of stocks to get a mild taste of day trading :eek:

    So I end up with over 10k shares of 1 stock I would like to sell a few minutes later. Focused on UNG and MGM that trade at around 20M shares a day hoping that would be alright, yet today go stuck with 11500shares of MGM. Had a sell order @11.30 it bounced back on that amount than would have sold on market price @11.29 or 11.28 but there was very low volume at that time and was afraid that the price might even go a little lower by the time I sell all shares. Finally sold just before market close at 11.22 when the volume seems always peaking.

    Volume seems fine a few times a day but not always. What kind of minimum average volume should I be looking for to trade 10 to 20k shares at a time ? at anytime of the day ?

    Besides how risky is it to place a limit sell order for all shares in the system ? Any chance it triggers automated reaction that could have adverse consequences for my goal ?

    Thanks for all input
  2. Google High Frequency Trading . Hopefully you will find out stuff you should know about volume...
  3. I used to scalp ATVI (at the time, avg vol > 14M/day) with 10k or 20k share lots... 95% of the time, I would get fills through my broker within 5 seconds, regardless of time of day or background activity... however, I would occasionally run into periods (of reasonable volume) where it would take over *30 seconds*. Never could get a good explanation why... they would complain that I had huge lots, but my trading logs showed that many times, periods of lower liquidity got much faster fills than 45 seconds.

    I think a lot depends on your broker, how they parse things out, and your tolerance for partial fills. Since I wanted to execute quickly, I concluded that I needed to stay away from such large lots. As you may have already experienced, it really sucks when the instrument starts moving quickly and you get a partial-fill... then need to manually cancel the order and reenter with the remaining shares at another (perhaps less-advantageous) price.
  4. Stick to trading SPY or IWM
  5. TD80


    If you are more than 5% of daily trading volume on an instrument, then you are going to have problems if you need to move quickly outside of morning or right near close, and even then you could get hurt.

    Also for the love of trading break up your order into smaller lots unless someone is on the bid for 10K. The idea is to blend into the noise and not make yourself a target.
  6. Or use a broker that splits across exchanges / has access to dark-pools :D

  7. 5%? 50k on a million share a day name?

    Try moving that in less than an hour without getting sodomized.
  8. luisHK


    Thanks for you feedback - and hints to stocks with much higher volume, indeed I should encouter less trouble with SPY or IWM. I was talking of slightly less than 0.1% of the daily volume though, far from 5%.

    I have a corporate account with Etrade and won't be able to open a new account with a cheaper broker before a few months so at the moment I have to deal with 9.99$ transaction fee, hence I'm wary to split my orders. Tried also yesterday to place a limit order for only a small amount of shares than to switch to the whole amount when the price gets close. Does it make sense , and by doing so is my order still remaining at the same place in the orders queuing or is it considered a new order ?

    Besides my account just switched to pattern day trader and the ( daytradin ) margin increased dramatically - need to study the question seriously as day trading was by no means the goal of putting some money in stocks but it does have some attraction.
  9. TD80


    It all depends on what you are doing, when you are doing it, and what your expectations are. Can you get VWAP for the day on a 5% of daily volume block? I would say undoubtedly yes if you have a decent broker or if you want to spend the day working the stock. If you decide to sell 5% of the daily volume at once, then yes expect to get pounded hard.

    There is no free lunch (except for maybe diversification, but I digress...). I should have qualified my statement by saying expect the pain to get excruciating > 5% of daily volume unless you are HFTing/market making.

    Obivously I am not some BSD trading 1M shares of AAPL at a clip, but I have experienced trading 5% of volume on stocks with 100-200K a day. It isn't any picnic and you learn a lot about friction, liquidity, and the real inefficiency of markets. I like liquidity and hate slippage so if you can make your nut on .1% of daily volume of an instrument, then I would say you are sitting pretty.

  10. TD80


    You should be thinking in terms of transaction costs as a % of expected payoff of the trade.

    If you are looking to buy $200,000 worth of stock and you need to pay $100 round trip, that may not be a huge problem for you depending on what your strategy is. If you are a swing trader or position trader and say you average 5% gain per trade over the long run, $100 worth of commissions isn't terrible on a $10,000 take down. You may get hurt a lot more in slippage doing one big order instead of 10 small ones if you push the market away too much. This is where art and science can meet in terms of trading.

    Now with that said, you should always be trying to minimize commissions as well. There is no reason to be paying more than necessary if you can find a good and reliable broker for a good price, unless you are being fed order flow or block trades or IPO's etc, but that is for the most part the realm of big shops, not us privateers.

    If you are talking about daytrading, or very small average returns per trade, then you should stop right now. It is a totally different ball game because transaction costs and slippage become the primary focus for this type of trading and it makes or breaks you since the margins are so slim. I don't mean any offense but based on the types of questions you are asking I would avoid any daytrading if I were you.

    #10     Sep 30, 2010