the size issue

[Breakout]

Originally posted by darkhorse




lol this is a direct quote from Marty Schwartz, is he one of your heroes too?

actually i take that back, he said the reverse i believe, that he 'feels a hell of a lot less pressure w/ 100K shares of stock'

LOL...sorry, I wasn't trying to garnish any undeserved credit.

Yes, it is a quote from Marty. Here it is and please forgive me...



"I don't feel the same pressure when I own 100,000 shares
of stock as when I own 100 S&Ps"...Marty Schwartz

 

[darkhorse]

it wasn't a criticism, i just thought it was funny because i do the same thing sometimes

read those guys enough and their thoughts become like your own

 

[Breakout]

Originally posted by darkhorse
The question is related to maximum size the market can take, not money management issues or stress issues. A liquidity issue basically.

That's probably what Marty meant: and why I made that post.

There's less "pressure" getting in and out of 100 S&Ps than
100,000 shares.

 

[darkhorse]

Originally posted by Breakout



That's probably what Marty meant: and why I made that post.

There's less "pressure" getting in and out of 100 S&Ps than
100,000 shares.

not to split hairs but i gotta split hairs: its the other way round, he feels less pressure with shares


i think he was speaking from a volatility perspective there rather than liquidity one

p.s. hey rs7 what's your take on liquidity issues if you drop by this thread, i suspect you have done more size than most

 

[Breakout]

Originally posted by darkhorse





not to split hairs but i gotta split hairs: its the other way round, he feels less pressure with shares


i think he was speaking from a volatility perspective there rather than liquidity one

p.s. hey rs7 what's your take on liquidity issues if you drop by this thread, i suspect you have done more size than most

Hmmmm...


I think you might have a point there, Darkhorse.


Maybe, when I read a little further down and he mentioned that it was much easier to short the S&P than stocks and that you
get much more bang for the buck, I assumed he was more "at ease" with the S&P, and thus under less pressure...lol


Anyway, I think you're right.

 

[jaan]

Originally posted by darkhorse
The question is related to maximum size the market can take, not money management issues or stress issues. A liquidity issue basically. Was wondering if other traders here have ever run into it or brushed up against it.

yes, we trade a system that has hit what we call "scalability limit", so in a way we deal with it every day. it sucks. it not only flattens the capital growth, it messes up the historical data -- periods where we have traded have different backtesting characteristics from those where we did not trade.

- jaan

 

[rs7]

Originally posted by darkhorse





p.s. hey rs7 what's your take on liquidity issues if you drop by this thread, i suspect you have done more size than most

The only time we did real big size as market makers (reportable limits) was when there really was no issue of liquidity. OEX, which we did constantly accounted for most of the open interest most of the time on the CBOE ...along with IBM (this was in the late 80's). The RJR - Nabisco deal was an instance where we could easily get into and out of virtually any size position. I remember we got into a mess with McCaw Cellular....our first real foray into an OTC stock with listed options. Seemed like there would be a great deal of liquidity because of merger talks with AT&T at the time. But we got pretty screwed because our presense on the PHLX was limited, and perhaps we were just seen as easy marks.....
So yeah, liquidity is almost always a major consideration. Now though, as a daytrader, that mentality has cost me. I got so used to trading the thickest stocks over the past few years that I missed a lot of opportunities by limiting my universe to the usual suspects. (IE...INTC, MSFT, ORCL, SUNW, ....NDX stocks mostly). Very liquid, but I realized too late (specifically over the past year), that I was trading really against all the other "me's" out there. And not being any smarter than the rest, I just managed to make money for my firm, and not much for me.
So now, I will try and implement what I used to know about spreads and such. Hope it comes back to me rather quickly

 

[trader99]

Originally posted by darkhorse
don't get the wrong idea w/that thread title...


just curious as to some of u guys opinion on the max number of shares per trade your method could handle before you started seeing a size related deterioration in performance (hypothetical/guess is fine, unless of course u are already there...)

Yeah, I've been wondering about that myself for a lil bit. I guess it all depends on the stocks you are trading and the type of day.

Obviously, if you are trading microcaps or small caps issues, I'm sure the upper limit is probably only a few thousands shares at a time if the daily volume is like less that 100K shares.

But for the really big cap, with tens of millions(i.e CSCO with daily trading volume of 40M-90M shares), then I would imagine you can probably go in and out 10-50K shares at a time before affecting the market? I really don't know. And I don't think you wanna push that either.

But it would be interesting experiment for those with the balls to try to push 20-50K shares on somethign really liquid and see what happens...

who wanna go first?

haha

 

[tntneo]

darkhorse, I am not sure I understand what you really want to know. Would you be more specific about your concern ?

liquidity is always an issue since it affects slippage. Depending on your timeframe it has more or less impact. But you know all that, that's why I am curious about where you want to go with this question..

I often hit liquidity limits. So that's why any system or method must take in consideration the size to at least control slippage and at worse know with what size the system does not work anymore.

My experience is, it comes very quickly scalping the NQ -despite the publicized liquidity. ES is better in that respect.
But again, with a reasonable timeframe, even intraday it's near impossible to hit a liquidity issue with index futures.

For stocks, it is not that difficult to get a theoritical idea, it simply depends on the average volume per day. You can't represent too much of that volume. I deal with that issue all the time with the market making side. It's easier to grow capital exposure by adding stocks under management than by adding size (well for what I trade anyway).
The rule is the same with high volume stocks, it just that I would not have the problem with my size and these high volume stocks.

again, I am curious to know where you are really heading with this darkhorse..

 

[Lavish]

"entries and exits will start causing unsustainable slippage, "

In that case...SIZE does matter.

Sorry if I offend any of you gentlemen...I just couldn't pass up the opportunity. (smile)