Limit max open positions

[markd01]

How do you guys go about making sure that you don't open too many positions in one day, in a margin enabled account?

I trade a mechanical stock trading system with lots of limit orders for the trading session. My requirement is not to open more than 5 positions or spend more than 130% of my account value in a single day, even though my buying power is much more, as it's a margin enabled account (4:1 day trading buying power).

The solution I had that works with most brokers is to have a GTC pending order for something that had no real chance of filling, lowering my buying power. Now, I'm thinking of moving some of my assets to Interactive Brokers which decreases buying power only after a fill, as opposed to pending orders, so my original solution would not work.

Had anyone tried using OCA (One Cancels Another) trades at IB, where I could have 5 groups of trades, and therefore limiting max open positions to 5? Is there a better way?

Thank you,

Mark

 

[mickmak]

???

WHy don't you just have a max position of 5 set by your risk manager?

 

[markd01]

Quote from mickmak:

???

WHy don't you just have a max position of 5 set by your risk manager?

Hi mickmak:

Can you be more specific? By risk manager, are you referring to a person at a proprietary trading firm, a ready made feature of IB, IB API? I'm looking to implement this at Interactive Brokers.

 

[N54_Fan]

Quote from markd01:

How do you guys go about making sure that you don't open too many positions in one day, in a margin enabled account?

I trade a mechanical stock trading system with lots of limit orders for the trading session. My requirement is not to open more than 5 positions or spend more than 130% of my account value in a single day, even though my buying power is much more, as it's a margin enabled account (4:1 day trading buying power).

The solution I had that works with most brokers is to have a GTC pending order for something that had no real chance of filling, lowering my buying power. Now, I'm thinking of moving some of my assets to Interactive Brokers which decreases buying power only after a fill, as opposed to pending orders, so my original solution would not work.

Had anyone tried using OCA (One Cancels Another) trades at IB, where I could have 5 groups of trades, and therefore limiting max open positions to 5? Is there a better way?

Thank you,

Mark

I dont know why you dont just use simple math. Give yourself limit to have at risk at any one time. I use 2% per trade and 6% MAX at risk at any one time. Just look at your # of shares multiplied by your stop loss price and subtract that from your acct value for that position. That is how much you have at risk per trade. Add these up and it should not be more than 6% of your acct. If its less then you can put on another trade until you reach this max. So obviously you could have 12 trades each risking 0.5% or 6 trades risking 1% or any similar combination.

 

[markd01]

N54_Fan,
Thanks for your input.

How do you go about making sure that your broker does not fill any more of your pending orders once you reach your max risk, without sitting in front of your computer and manually starting to cancel all outstanding orders manually?

 

[N54_Fan]

Quote from markd01:

N54_Fan,
Thanks for your input.

How do you go about making sure that your broker does not fill any more of your pending orders once you reach your max risk, without sitting in front of your computer and manually starting to cancel all outstanding orders manually?

Assume they ALL get filled and then check the market at least a few times a day. Then adjust by adding new orders if some of your orders did not fill. If you have a system that produces so many opportunities for you to trade then missing a few if they do not fill is no big deal. People that have systems that only produce a few trade opportunities a week or month are the ones that need to worry about that. Obviously, if you have so many opportunites that you can not take them all then you must use your judgement and only put in orders that you REALLY want to get filled. Just have a second tier of opportunites that you would like to trade IF any of the first tier did not fill.

 

[rosy2]

Quote from markd01:

Hi mickmak:

Can you be more specific? By risk manager, are you referring to a person at a proprietary trading firm, a ready made feature of IB, IB API? I'm looking to implement this at Interactive Brokers.

I use IB and keep track of each strategy's order/positions/PnL separately through a custom order management system. That way I know how each strategy is doing.