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Hi everyone! So I realize the answer to this question is most likely going to be: "however much you plan on buying or selling", but I figured I'd ask what you all have experienced in live trading. My question is, for coarse universe selection, what do you feel is a good minimum dollar trade volume to set as a filter? I've heard that if you're too low with respect to your initial capital and your backtest will be very inaccurate, due to the fact that backtesting will never be able to capture illiquidity. Too high, and it's possible to constrain your search to mid- to- high-cap securities, thus leaving out growth stocks. Anyone have experience in this, maybe with regards to live trading? As always, thanks for your time!
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Stephen Oehler
FYI just to update this discussion, here's a good read regarding expected dollar volumes for small cap stocks (it's from Motley Fool, so take that as you will). http://wiki.fool.com/Daily_dollar_volume?source=edddlftxt0860001
Michael Handschuh
Hey Stephen, I think this is a two-fold problem. First, you'll need to identify stocks with enough liquidity in order for you to do your trading. Second, if you're working with semi-illiquid stocks then it will be worth it to implement an IFillModel that looks at the volume. For instance, you could have a PercentageVolumeFillModel that would only produce fills up to a certain percentage of the previous bar's volume, then at least you can model the illiquid-ness of some of these smaller stocks. Another way would be to account or the illiquidity via an ISlippageModel that increases the slippage value as the volume decreases
Stephen Oehler
Great advice! I like both of those ideas. As it is, I'm attempting to place filters at a conservative limit to ensure I won't have liquidity problems in the first place, but it still may not be enough. Thanks!
Richard Hamilton
Would someone provide a link to the documentation that explains and shows examples of the PercentageVolumeFillModel referred to above by Michael?
I've found links to IFillModel and ISlippage, but nothing about PercentageVolumeFillModel
Michael Manus
hehe he meant to do this as an idea for implementing that :):):):)
Jared Broad
Richard Hamilton I think this model might meet your needs:
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Stephen Oehler
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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