locking in profits with big share size

[newbietrader66]

hello,

been paper trading with TC2000 for about 3 months now.

lost about 20K (on paper) in the first 6 weeks.

backtested lots of strategies tried to get a reliable system of
finding direction (either up or down) at the open.

i can now reliably find stocks that go up above the previous days' close or
the premarket morning low and place buy (limit) orders in (3) increments with
2 point spreads around that number. All of the stocks i'm choosing have a social media positive status with some sort of positive catalyst.

about 15-20% of these limit orders will get filled at one or more of my positions.
i do not place a stop at the open, i let the natural volatility of the open swing the stock up and down and try to get it to trigger my limit order. If the limit order(s) are not filled i cancel the orders and forget about the stock.

i have seen that even if i get filled and the stock continues to go down below the previous day's close i can always wait it out and it will recover during the day apparently due to the high social media coverage.

generally i watch the stocks go up in the first 2-5 minutes, place a hard stop once volatility stabilizes and i see maybe $1500-2000 green, and then manually move the stop up incrementally to scalp it until it stops itself out. I give it very little room to run. Then i take the $ and close out for the day almost always within 10-20 minutes from the open.

now my question.

since i see this working for me almost all the time what will happen if i go in with some really big share size, like 100,000 or 200,000 shares and do the same modus operandi, locking in profits and now i'm maybe $50,000 or more in the green and i'm trying to close out at market? (have not tried really big positions yet but i want to have an idea what might happen with real $)

i understand about spread, but during the open spread is usually very thin due to high volume trading so as yet this has not been a factor. I do not use "low float" stocks for this strategy.

i still don't see that there are enough shares available in level II to close me out at market at a really big position size---how will i close the trade?

possibly i cannot find the answer here, but i'm about to test this with real $.

i've already had some deals over 10k that close out ok (paper trading), but i'm wondering what would happen with real $ on the line.

i understand many would think this is risky trading, but i'm managing my initial risk with lowball limit orders on positive sentiment stocks that have lots of lookers. True, only a minority are getting filled, but when they do get filled there are big gains within 5 minutes. The only one i've lost on so far is MDVX which i''m been holding at 0.95 and now i'm back in the green, and i'm sure i can get out of it ok. So i've had consecutive green days for almost 3 weeks now. So nobody needs to tell me it doesn't work. Beating Ross Cameron every day with my very simple strategy. And i'm a newbie.

thanks.

 

[Dr. Toad]

There are not a large number of stocks that trade over 10,000,000 shares regularly everyday. Even at that many shares a day you are talking about trading 1% of that volume...really 2% because you need to get in and out...with a 100,000 trade size.

I have tried (live trading) a somewhat similar, albeit much less successful, strategy that involves placing relatively low limit orders at open. To give you an idea of the liquidity you can expect:

A base filter of mine for this was the stock needs to have traded 500,000 shares a day for each of the past 5 days. In live trading I found that even with relatively small orders of 200-300 shares, I was quite often receiving partial fills...do the math on that one...I was having a hard time doing this with only trading about 0.05% of the expected daily volume 0.1% considering both in and out.

The issue with this style of trading is that, yes the price spikes at open can be large, but the volume at the tips of the spikes is very very small. What you will find is that you will get many partial fills, except for the time when the price fall is legitimate...then you will probably get completely filled and be screwed.

Another issue with doing this is the capital you would actually need to get the number of shares you are talking about. Even at a low $10 a share stock, you would need an account size of $250,000 to purchase 100k shares with a 4x margin account.

Also from reading your post it looks like you don't have a hard dollar loss stop or a time stop with this trading style...you will find out that your trading capital will get tied up in your losers...even if they are rare. I have looked at similar trading styles and hold times can occasionally exceed a year doing this...this style of trading works great until it doesn't, and with the large position sizes you are looking at, it won't​ take long for you to be completely tied up with losers and unable to make any trades. There is also the potential for a trade to go to zero doing this...a rare possibility, but a possibility nonetheless.

But hey...don't let me determined you, try it live...that is the only way to know for sure. I would just very strongly advise trying it live with a very small fraction of what you intend to ramp up to.

 

[newbietrader66]

thanks for that Dr. Toad,

i'm choosing small cap stocks $5 and under as a rule.
the (3) incremental limit buys are "fill or kill" and spaced so that
at least one will fill completely. Even 10 points on 10k shares gives
a quick $1000 during the initial runup then the hard stop is placed to
lock it in, but usually it pops higher than that within 2 minutes. Within the last several weeks i've have some 7-9k deals, an 11k and 13k deal, and never less than 1000k. Typical gain is about 4-5K. True this is paper trading, but i think it's valid testing, because just a few months ago i was losing $ consistantly playing with the same platform trying to figure out warrior trading's momentum strategy that i found overly complex for me. I wanted something simpler.

I have a mental stop of 2k but so far have not had to use it because i'm picking the top 3 positive social media trade-ideas bullish picks at 9:20-9:25am and quickly placing my limit orders, quickly confirming in stocktwits sentiment that they are 100% bullish, and letting it run. I never chase the stock up, it either fills within the first minute or i cancel the order. If i cannot get filled at the lowball limit order at the open this strategy is not valid. I do not chase the stock up or try to short it back down. Once in a while it does dip below my entry but immediately bounces back. You are correct that as the spike goes to the top volume dries up, but by then i've already locked in the profit and manually adjusted the stop just under the run only leaving $100 room to run as i advance the stop manually. This is very easy to do in TC2000 with their manual sliding feature, don't think DAS has this. i let it stop out and close the trade by itself.

i think your average daily volume tip is a good idea, i'll add that to my custom filter, thanks!

There are not a large number of stocks that trade over 10,000,000 shares regularly everyday. Even at that many shares a day you are talking about trading 1% of that volume...really 2% because you need to get in and out...with a 100,000 trade size.

I have tried (live trading) a somewhat similar, albeit much less successful, strategy that involves placing relatively low limit orders at open. To give you an idea of the liquidity you can expect:

A base filter of mine for this was the stock needs to have traded 500,000 shares a day for each of the past 5 days. In live trading I found that even with relatively small orders of 200-300 shares, I was quite often receiving partial fills...do the math on that one...I was having a hard time doing this with only trading about 0.05% of the expected daily volume 0.1% considering both in and out.

The issue with this style of trading is that, yes the price spikes at open can be large, but the volume at the tips of the spikes is very very small. What you will find is that you will get many partial fills, except for the time when the price fall is legitimate...then you will probably get completely filled and be screwed.

Another issue with doing this is the capital you would actually need to get the number of shares you are talking about. Even at a low $10 a share stock, you would need an account size of $250,000 to purchase 100k shares with a 4x margin account.

Also from reading your post it looks like you don't have a hard dollar loss stop or a time stop with this trading style...you will find out that your trading capital will get tied up in your losers...even if they are rare. I have looked at similar trading styles and hold times can occasionally exceed a year doing this...this style of trading works great until it doesn't, and with the large position sizes you are looking at, it won't​ take long for you to be completely tied up with losers and unable to make any trades. There is also the potential for a trade to go to zero doing this...a rare possibility, but a possibility nonetheless.

But hey...don't let me determined you, try it live...that is the only way to know for sure. I would just very strongly advise trying it live with a very small fraction of what you intend to ramp up to.

 

[Dr. Toad]

the (3) incremental limit buys are "fill or kill" and spaced so that
at least one will fill completely. Even 10 points on 10k shares gives
a quick $1000 during the initial runup then the hard stop is placed to
lock it in, but usually it pops higher than that within 2 minutes.

Give me an example of one of your paper trades and I will either prove to you why it won't work or prove to you (and myself) that it is plausible. I still am thinking you will run into liquidity issues, but then, I have never messed with stocks under $15.00 much, so can't really say for $5.00 stocks. I am assuming the fill or kill order means your entire order must be filled, partial not accepted, correct?

This may be the first thing you need to reconsider...if you are trading extremely large volumes, you are much less likely to get a complete fill...also there is the potential that you may effectively push the market away from your order by having such a large and visible limit order set. If may be better to break your order down further into many smaller limit order at $0.01 or $0.02 increments so as not to "spook" the market away with one (or three) massive limit orders. Just make sure to keep the all rounded out to the 100's. Odd lots will cause even more headaches when looking to get limit orders filled.

One other item that I am not sure you have considered yet is the impact commissions will have on your trades. If you are only expecting movements around $0.10, then, even with the lowest commissions of $0.005/share, you will have $0.01 of your trade (10%) eaten up by commissions. This is about as low as I tend to go although I look for a minimum of about a $0.20 movement since my commissions are twice that so still 10% at that level.

 

[barjon]

Nt66

Before you start throwing your money around remember that you have been testing this strategy in very buoyant market conditions, so be cautious.

The bigger size you trade the more difficult it becomes to get filled without adverse slippage. So, again, be cautious.

 

[newbietrader66]

all good advice, thx

 

[gerryg]

newbietrader66, I guess you lack the part of managing your losses, cuz its easy to elaborate on how you will manage a trade when it runs in profit. What you will do in case of a streak of for example 10 losing trades, Are you sure you can manage trading psychologically and materially in this situation?

 

[newbietrader66]

newbietrader66, I guess you lack the part of managing your losses, cuz its easy to elaborate on how you will manage a trade when it runs in profit. What you will do in case of a streak of for example 10 losing trades, Are you sure you can manage trading psychologically and materially in this situation?

for me managing risk means being very sure of the outcome before entering the trade.

if you do limit orders prior to the open on stocks that have unusual very high positive premarket sentiment (based on news) and your lowball limit orders are down near yesterdays close, and you do not chase the stocks, and if you get filled (which occurs only 10-15% of the time) you will see a nice pop at some point intraday.

placing multiple incremental orders around the 4 pm prior day (above and below) the closing price usually insures that you will get some fills and if you get multiple fills you've averaged down which enhances profit potential.

 

[Dr. Toad]

and if you get multiple fills you've averaged down which enhances profit potential.

and loss potential... Just curious to know if you have started live testing this yet and if so how is it comparing to the paper trading?

 

[Quantt]

Just few points: Ross Cameron Like you trades on a simulator, so his and yours strategies will not work in real life, because you'll not get filled or get filled on the way down resulting in large losses ... also you might end up the majority share holder of those tiny low float companies...