Small trader influence on SP500 prices

[adrianjm]

I am a small trader who trades SP500 stocks. My size per order is about 10k US. I enter and exit generally on limit orders, and these orders are placed before market open.

My question is: Does my placement of limit orders in pre-market affect the opening? With such a small order size, my initial thoughts are that they do not, however I am not an expert on how the opening auction process works.

For example:

Say I hold some shares in TIF (Tiffany &Co) and the prior close was 79.55. I place a limit order - prior to market open - to sell about 10k worth of shares for 79.88. Is it possible that without my resting order, TIF could have opened much higher, but the fact that someone has a resting order for 79.88 means that a market maker will simply take advantage of this and take my order, and thus create an opening price at my price?

Or is this scenario far too simple?

I'd like to know whether I am better off placing my limit orders into an open market rather than setting them up prior to open, or whether there would be little difference, based on my small position size?

Cheers!

Adrian

 

[Trader333]

In my view it will all be down to volume of the stock that you are trading. The higher the volume then the less your orders will have an influence on price movement. As a rule of thumb, I would avoid anything less than a daily volume of 1 million.

 

[adrianjm]

Do you only take into consideration the volume, or the volume*price? Tickers such as AZO and CMG regularly trade less than 1M, but that's primarily due to their high stock price.

According to my data, the smallest ticker in terms of Volume x Close on the SP500 is NWS, with a 50 day MA of just over 20.5 million. Is that type of volume big enough such that a 10k order makes negligible impact?

 

[Trader333]

Well I no longer trade US stocks but I would trade prices between about $10 and $50. As you say when you have a volume of 20.5M then your 10K account is not even noise.