How many shares before slippage is noticed when scalping?

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Xenomorph

Hi. I am not a successful trader, but I am still trying. Once in a while I might have a good day paper trading, then sit in the bathroom with a calculator and imagine what the compounded % return would be if I could magically reproduce those results consistently in real trading.

The thought occurred to me... if you are a successful trader and found yourself in possession of a large and growing account, how many shares could you rapidly trade while scalping before you started to notice poor fills because your trades are so large?

For example, you are scalping the 5 min or 1 min timeframes in a liquid equity that trades an average of 100 million shares a day. Would you notice issues trading 100 shares? Or 1,000 shares? Or 10,000 shares? At what point does it become unreasonable to expect that you can jump in and out of trades in a flash at will? I do not trade futures. I'm just focused on equities right now. I know futures are more liquid but for this example let's just say equities.

Thanks for any advice. With more info my daydreaming might become a little more 'realistic'.
 
Obviously "it depends". Some things to consider:

1) Share price is fairly arbitrary (although on US exchanges share price matters more than it should due to legacy rules and pricing schemes where charges are per share), so converting to dollar volume before quantifying market impact should be your first priority. I.e. simply dollar volume = number of shares * share price in USD.

2) Also on US exchanges, there's the concept of even lots, so an exact multiple of 100 shares gets a different treatment from any remainder when filled (typically, faster fill). 100 shares therefore typically is the least market impact for a simple market order - but then you might exhaust one side of the bid ask spread resulting in a wider spread after the fill.

3) Dollar volume can be compared to free float and market cap of the stock to give you some idea of market impact.

4) Volume can be compared to daily average for the stock to give you even more of a clue. If a stock averages 100k shares daily and you're trying to fill a 10k order all at once, you will most likely have tough luck, unless you inspected the order book beforehand to see there being a latent offer for the shares at an acceptable spread.

5) Like I said, literally look at the order book. Top level with tighest spread will be very thin but can be used to estimate 100 share impact at least (with the caveat that HFTs and other actors will be playing their game so it will be stale by the time your order hits the market).

6) Of course there are better methods to make a large order in a not super liquid stock than putting it in as a single market order.... but typically the trade off is in fill time. So an algo that relies on "instant" fills in backtesting might rather probably not be physically realizable, and not just due to a lack of HFT infrastructure.

Some people might reply with some rough figures for you based on freefloat or average daily. But you should be able to figure this out yourself as well, and understanding yourself what's going on is valuable and arguably necessary for intraday trading.

PS. Nice user name, I love the Alien(s) movies myself. ;)
 
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You’re a scalper and you don’t know the usual size of the orders ?

If you want to get an idea then just open a Time and Sales and check what’s hitting the depth.

Look at the best Bid, best Ask size.
 
Snuskpelle said:
Obviously "it depends". Some things to consider:
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PS. Nice user name, I love the Alien(s) movies myself. ;)
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Appreciate the tips. I will save and refer to them. My username was chosen before I learned the earth was a plane covered by an impenetrable dome and travel to outer space is a lie, but thanks. lol

If it helps I'm just focused on a small number of equities. One in particular averages 100 million shares a day and is currently trading around $200 a share.
 
Xenomorph said:
Hi. I am not a successful trader, but I am still trying. Once in a while I might have a good day paper trading, then sit in the bathroom with a calculator and imagine what the compounded % return would be if I could magically reproduce those results consistently in real trading.

The thought occurred to me... if you are a successful trader and found yourself in possession of a large and growing account, how many shares could you rapidly trade while scalping before you started to notice poor fills because your trades are so large?

For example, you are scalping the 5 min or 1 min timeframes in a liquid equity that trades an average of 100 million shares a day. Would you notice issues trading 100 shares? Or 1,000 shares? Or 10,000 shares? At what point does it become unreasonable to expect that you can jump in and out of trades in a flash at will? I do not trade futures. I'm just focused on equities right now. I know futures are more liquid but for this example let's just say equities.

Thanks for any advice. With more info my daydreaming might become a little more 'realistic'.
More...

I don't get it, futures are MORE liquid on a stock, huh? are you saying always sell the bid or buy the offer? Not sure why that is an issue unless the spread moves around extremely quickly. I tried this on a smaller market once, canadian dollar futures, ET can mark that down as an example of what not to do.
 
Xenomorph said:
Hi. I am not a successful trader, but I am still trying. Once in a while I might have a good day paper trading, then sit in the bathroom with a calculator and imagine what the compounded % return would be if I could magically reproduce those results consistently in real trading.

The thought occurred to me... if you are a successful trader and found yourself in possession of a large and growing account, how many shares could you rapidly trade while scalping before you started to notice poor fills because your trades are so large?

For example, you are scalping the 5 min or 1 min timeframes in a liquid equity that trades an average of 100 million shares a day. Would you notice issues trading 100 shares? Or 1,000 shares? Or 10,000 shares? At what point does it become unreasonable to expect that you can jump in and out of trades in a flash at will? I do not trade futures. I'm just focused on equities right now. I know futures are more liquid but for this example let's just say equities.

Thanks for any advice. With more info my daydreaming might become a little more 'realistic'.
More...

Zoom into faster TF’s (seconds), you’ll observe liquidity voids aka gaps (prices not traded) from widening spreads during high impact news events. On HTF’s they look like whole bars.
 
Xenomorph said:
Appreciate the tips. I will save and refer to them. My username was chosen before I learned the earth was a plane covered by an impenetrable dome and travel to outer space is a lie, but thanks. lol

If it helps I'm just focused on a small number of equities. One in particular averages 100 million shares a day and is currently trading around $200 a share.
More...

‘Hope this is trolling else there is no hope for any durable success in trading. The market has a habit of serving up truth regardless of your beliefs - critical thinking is essential.
 
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