Liquidity

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October 8, 2018 at 8:21 am #101852

RobGiles
Member

Interested in what people’s thoughts on the minimum liquidity required to trade a system? I’ve read that you don’t really want to be more than 5% of daily volume. I’ve certainly found it an issue on the odd occasion trading the ASX Growth portfolio FWIW.

October 8, 2018 at 11:43 am #109254

ScottMcNab
Participant

Prob depends on the system Rob..seen figure of max 1% mentioned for MRV…so for MOC could interpret that as 0.5% each way.?..for longer term systems I suspect there are ways around it (e.g buy 1/2 at open and 1/2 at close)…thought I read some time ago about an IB algo that was meant to give you the average price over the day or something similar..the “trades” setting in backtester has an option for using average price instead of open or close to see if it impacts your results.

October 9, 2018 at 7:14 am #109257

SaidBitar
Member

If the system is long term I mainly make sure that the stock is liquid but i do not bother with my size vs the daily volume. Totally opposite on MOC you need to be as small percentage as possible.

I did mistake few months back on ASX MOC i ended up 60% of the daily volume 30% for entry and 30% for exit. the effect was before the close i saw big profit in the portfolio but after the close i managed to bring the price down and ended in loss.
the mistake was additional zero in my position so i was 10x bigger but it was good to see the effect

October 9, 2018 at 12:42 pm #109255

RobGiles
Member

thanks guys

October 17, 2018 at 1:59 am #109256

RobGiles
Member

I can’t for the life of me understand why adding liquidity filters to a momentum system that trades the $XAO universe actually worsens max DD. FWIW I’ve used the average volume and turnover filters that were used in Unholy Grails.

If anyone could shed any light on this it would be appreciated.
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