Execution Fills for 1 share lots vs 100 share lots?

S

stock_punter

Hi Everyone,

Can I please get your opinion about fills for 1 share lots vs. 100 share lots?

Do you think the prices will be much different between the two?

The reason why I ask is because it seems to make sense to try out a strategy trading the smallest unit possible, which for stocks is 1 share.

With Interactive Brokers the commissions charges aren't too bad: it'd be $1 each way since only 1 share is involved. For NASDAQ stocks you can buy or sell 1 share lots no problem.

For NYSE stocks, and probably AMEX, you need to initiate with a 100 share lot, but then you can just sell off 99 shares right away to leave you with a 1 share exposure. Somewhat of a pain, and you'll pay the spread on the 99 shares, but doable still.

I plan to use IB's BEST execution setting in the trades.

However, trading one share lots isn't helpful if the prices you get are totally different than when trading one share lots.

Any thoughts on the difference in pricing?

Thanks.

-- Punter
 
I question the value of trading one share lots unless your just trying to learn the execution part of it. You dont really learn anything, imo, unless you've got some money on the line. At least enough to hurt a little if you lose it.
 
The major problem in execution will be when an ECN that doesn't accept odd lot orders like instinet is on the inside bid/ask. But even then, i doubt you'd have any trouble getting your order executed.

But if you are only going to buy 1 share, you might as well paper trade and save yourself the extra couple bucks in commission. Trading 1 share will give you unreasonable executions that would not be possible if you were trading any actual size.
 
punter,

Why on earth you will trade 1 share lots, except for testing? With 1 share lot you need 2 points move in the stock, just to break even ! Moreover, same stock 1 share lot buying/selling the same day is considered "daytrading", and with this activity your account will be marked "Pattern Daytrader" with just three 1 share daytrades.

Further, you'll need minimum 25k to continue to daytrade 1 share lots. But why will you trade 1 share lots if you have >25k?! 1000 shares of CSCO is less than 12k.

Island ECN fills for 1 share lots will be the same or better than the fills of 100 share lots. Some ECNs don't guarantee odd lot execution (REDI, ARCA etc.- they can continue trading through an odd lot without the obligation to execute it), with those ECNs, you'll get better fills with 100 share lots than with 1 share. Some ECNs don't accept odd lots at all (Instinet). MMs will probably give you similar fill for both.

imo, only trade 1 share lots if you want to loose money.

Fohat
 
Nicodemus: “You dont really learn anything, imo, unless you've got some money on the line. At least enough to hurt a little if you lose it.”

Wise words from Nic. Put up just enough so it means something but not enough that it breaks you. You need to know how you will deal with pressure and losses.
 
Thanks guys for the post.

Just to be clear, my idea of trading 1 share lots is just to test out a methdology, not to make any significant profits. I would be looking to see if you can make any money from the methodology before commissions

My thinking is that if you're going to test a methodology, it makes sense to trade it as small as possible to see how well it works for you. Better to have losing trades on 1 share lots than 100 share lots!

However, if the price of your fills are unrealistic compared to your normal trading size, then the test results trading one share lots would be irrelevant.

In regards to paper trading: in my opinion it isn't worth the paper it's on, as you won't know the execution issues that may arise from your methdology, such as from bad fills, fast markets, problems that arise from bad prints, software failures, ets.

Thanks again all for your thoughts. You guys & gals on EliteTrader are the greatest.

-- Punter
 
I started using 10 share lots for the exact reasons you state. I am now trading 100 share lots and am ready to increase to 200 next week (and then increase more as long as I remain profitable). I haven't noticed much difference between 10 share and 100 share lots. I didn't trade NYSE stocks until I was doing 100 shares, but right now I like Nasdaq anyway. I don't think your idea is so bad, I've learned some lessons for a lot less than I would have if I was trading 1000 share lots.

I traded 1000 share lots back in '97, but the pressure was crippling for a newbie. I traded for several months and then moved on to other things for a while. I opened that account with 100K and closed it with 95,500. I would have made a lot more with an index fund.:( My point is, I couldn't develop the confidence I needed trading 1000 shares at a time. I have had a much better and more useful experience this time. The others make a good point that the psychological aspect is a lot different when you up your size, but you can cross that bridge once you're profitable with small lots. Good luck.
 
Punter-Your question is two-fold. Relating to liquidity, there will be no discernable difference in being able to get filled at the same price for 1 share vs 100. As someone said though, routing choices will be limited to those that accept odd lots (primarily ISLD and SOES) however you indicated you would use IB BEST so you would not be selecting your route anyway. Does IB Best allow odd lots? GOing from 100 shares to 1000 will be a little more noticable from a liquidity perspective.

On a related note, I am assuming IB has a $1 minimum since you said the commish would be $1 but they are 1 cent per share?! If so, why not just trade the 100 shares for the same buck commish and get a little more "real" feel out of it. How much pain can you really take with 100 shares if you set stops appropriately? If you lost $50 plus the commish, I agree with another poster who said that "no pain no gain". You have to feel like something is at least on the line to gain confidence in the strategy.

Fohat-since when does any ECN guarantee fills at the NBBO?! If their is a contra side match for your price or better, you are filled...if not then you are not, regardless of what the NBBO is. Do you not agree with this?
 
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