I’ve always avoided trading markets that have low volume because of the risk of my stop-loss being missed. Even if I was watching the quote every second that the market is open I would have unlimited risk if gapped substantially. As an individual speculator have any of you found methods to limit losses in markets that aren’t liquid?
Do you trade thin markets?
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Robert Morse
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I do personally like them, but they are for longer term holdings or flips. I would never use a stop order on these. I have traded some with volume under 10,000 shares a day, $0.50 wide markets. I have to be very patient and play the stock range. You can't make a lot of money doing this. It might take a few days to flip 200 to 1000 shares, but I might average $0.25. I might also end up waiting weeks.
I should’ve added “short term positions” to my post. I don’t really trade stocks, I let my 401k manager do that for me. I do buy small amounts of companies that are doing things I think are cool (like Tesla) but 99% on my activity is in futures. There have been times that a thin futures market will gap limit against me and never trades at my stop loss price so my stop isn’t triggered. A few times that actually helped me recover a little of the loss but most of the time the market will continue moving against me. I’m very gun shy in thinly traded futures and haven’t traded one in a couple of years. There’s another thread on here asking about electricity futures that got me to thinking about it.
Agree, and there are more of us than you think.With options, volume is irrelevant if you intend to keep it till expiration, since it then auto-expires (ie. no trade necessary to do, therefore volume then doesn't matter at all).
Actually I even prefer trading such options...Not many do so nor will admit
Most of my options are thinly traded. If my bets are even wrong, it will be a total loss. Rolling doesn't work because it tends to compound a bad situation.
If you are interested to trade thin markets, these are some of the futures you can trade
NASDAQ VELES CALIFORNIA WATER INDEX from CME
LUMBER FUTURES from CME
KOREAN WON FUTURES from CME
various MSCI indices from HKFE
various MSCI indices from SGX
various MSCI indices from Eurex
The list is actually very very very long.
So you should be very happy with the long list.
Do note that out of 7 billion people, you might be the only one trading it.
Happy trading thin markets.
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Do you use spread orders? Or are you exposed waiting for the second leg of the spread to get filled?FCOJ spreads ... love it
It's a double-sided sword
Getting spreads filled can take time,
but then such true spreads are more safe than trying to do it yourself leg by leg,
though the latter is more flexible and if things go well one can get even some better prices.
Also the initial margin or cash requirement is much less with true spreads.
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I own a few iShares ETFs. They are known for their low volume trades...3-5,000 shares per day. They are usually minor (obscure) products (junior gold miner/regional banks). I even had one of their coffee ETFs before it shut down (JO).
I do covered calls on some of these. You have to be REALLY patient when trading these. I may wait weeks/months/years, when the industry comes into favor...Then do the covered call.
I wait for the option/market to come to me...
The exact opposite of a day trader/type A personality...
Watching paint dry...
I do covered calls on some of these. You have to be REALLY patient when trading these. I may wait weeks/months/years, when the industry comes into favor...Then do the covered call.
I wait for the option/market to come to me...
The exact opposite of a day trader/type A personality...
Watching paint dry...