Do you trade thin markets?

[Axon]

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?

If 90%-95% of active traders lose then I want to go where all those losing traders are so I can take their money (I apologize for sounding cynical but it is what it is). All volume isn't created equal and volume isn't the only thing that makes a good tradable stock but without it I'm not interested.

 

[long]

If 90%-95% of active traders lose then I want to go where all those losing traders are so I can take their money (I apologize for sounding cynical but it is what it is). All volume isn't created equal and volume isn't the only thing that makes a good tradable stock but without it I'm not interested.

I forgot to mention it in the original post but I was referring to futures contracts. A thinly traded futures contract is a different animal than a stock.

 

[Robert Morse]

I forgot to mention it in the original post but I was referring to futures contracts. A thinly traded futures contract is a different animal than a stock.

Maybe now that we know this is futures, can you give an example? Big difference.

 

[long]

Maybe now that we know this is futures, can you give an example? Big difference.

Example of a stop getting missed? Let’s say I’m long at 10$ and my sell stop is at $9.85 and the session close is $9.90. The market opens the next session at $9.70. My stop loss order won’t be executed until the contract actually trades at $9.85. This happened to me more than once back in the day. It’s been a long time since I’ve traded a thin market (almost 20 years) and this is the reason I avoid them.

 

[Robert Morse]

Example of a stop getting missed? Let’s say I’m long at 10$ and my sell stop is at $9.85 and the session close is $9.90. The market opens the next session at $9.70. My stop loss order won’t be executed until the contract actually trades at $9.85. This happened to me more than once back in the day. It’s been a long time since I’ve traded a thin market (almost 20 years) and this is the reason I avoid them.

I asked for an example of a future you trade with thin markets. Not an example of a bad fill from a STOP order.

 

[long]

I asked for an example of a future you trade with thin markets. Not an example of a bad fill from a STOP order.

My example wasn’t a bad fill, it is a MISSED EXECUTION by the exchanges order filling system.

I’m not contemplating a future trade, I was just surveying for any strategies that people here may have to reduce the risk of that situation. There is another thread on here surveying if users would be interested in trading power futures and I instantly thought THIN MARKET. I shy away from thinly traded futures but I thought I’d ask how other people handle them.

 

[legionx]

It depends. You can get a real bang for your buck if you are right but, based on my experience in most cases, you can see things that aren't actually there.

 

[maxinger]

What a strange trader.
Why make your life miserable?


Trading a thick market is already very challenging.
And chances of success is < 10%.


Trading a thin market is even much more challenging.
And chances of success is < 0.1%.

 

[ironchef]

Do you use spread orders? Or are you exposed waiting for the second leg of the spread to get filled?

Why spread? Anytime you spread, you cap the gain and destroy the lottery ticket (the potentially uncapped gains).

IMHO, it is a tale of two cities, the professionals and the retails.

Those of us retails buying thinly traded are looking for a lottery bet. If you are nice you call us speculators but in reality we are gamblers and we provide liquidity, most of the time.

The professionals? They are the house, they love to take the other side.

 

[ironchef]

If 90%-95% of active traders lose then I want to go where all those losing traders are so I can take their money (I apologize for sounding cynical but it is what it is). All volume isn't created equal and volume isn't the only thing that makes a good tradable stock but without it I'm not interested.

There is a way to do it: Bet against yourself. Every time you want to place a trade, reverse the order and you win 95% of the time.