December 16, 2005
Mininum Bid and Ask size filters
You want to take position quickly at the market and are afraid of pushing the stock price too high ?
You have one solution :
- Set the max spread filter to 10 or 20 cent.
- If you are going long then set the min ask size filter.
- When short set a minimum bid size filter.
Imagine you want to invest 10 000$ for each position and your trade only stock that have price > 10$
If you buy at the market and the ask size is 100 shares, you will catch that ask price then catch
the higher ask... until you order is filled.
The price of stock was 12$ and now its 12.5$, no good at all, a very big slippage.
Now if you set min ask size to 1000 shares, when alert is reported and you quickly send market order
your order will be filled at the ask price, it will not go higher.
Generally, it happen like that, but sometimes trade-ideas report an alert that have more than 1000 shares on ask, then when you enter your position, the ask size became smaller, and you will be filled at higher than current ask.
When this happen to me, i set a bigger value in minimum daily volume.
But i don't put a too high value in minimum daily volume, because i want to catch these small stock that move quickly.
Another easier solution is to put limit order at ask price, that way you will not pay more than the ask price but
you are not sure that all your order will be filled.
You can also use both solutions :
Set minimum ask size and make limit order at ask price.
Your order then will be completely filled most of the time.