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How many contracts can crude handle?
Updated November 7, 2017
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How many contracts can crude handle?
November 7th, 2017, 04:22 AM
Reading UK
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rassi
My brain is obviously hard wired to see swear words, I totally misread your first sentence lol
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Same here! haha.
Can you help answer these questions from other members on NexusFi?
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November 7th, 2017, 08:48 AM
Taipei, Taiwan
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Let me query my database. Yesterday (11/6/2017) to now, the average bid and ask size is 61.55 contracts . I don't think you need to worry about slippage due to bid /ask spread for a long time. There is another kind of slippage which is due to quote latency during fast market rather than on bet size. During the EIA inventory report, for example, it is not uncommon for price to move 40 ticks by the time you finish typing the order.
November 7th, 2017, 10:35 AM
Tel Aviv, Israel
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November 7th, 2017, 10:40 AM
Tel Aviv, Israel
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chuckclymer
I've seen CL with more volume than ES lately, but it's normally always just behind. My mentor day trades 5-10 regularly, but throws in a 20 lot for swing trades. Deeper pockets than I've got. I think your trading style would also be a big factor. Sounds like your not a
scalper , so you should be ok. Like paps said though, CL is a gutsy instrument and can leaving you speechless in the blink of an eye. Good luck and trade the edges!
Definitely not a scalper.
Much more of an intra-day swing trader.
I'm guessing at 20 lots scaling in would be quite doable, 5/5/5/5 or 10/10 etc.
But agreed, it doesn't matter what style you're trading with crude, you get on the wrong side of it you're in deep ****
November 7th, 2017, 10:44 AM
Tel Aviv, Israel
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fivewhy
I think this has been pretty well answered.
I just wanted to mention that the term you're looking for (in case you wanted a deeper dive) is called "market impact risk". Wikipedia has a brief article; it's not super informative and not practically useful but may give perspective.
https://en.wikipedia.org/wiki/Market_impact
I don't daytrade and I do not put on 10 CL k's at a time (I do algorithmic entries and discretionary exits, if that makes sense), but I agree that the market risk is going to be *roughly* the same with each additional k as long as you're under 10 k's..all other things being equal. Once you get above 10 k's, impact risk starts increasing with each additional
contract added to your order. Then, once you hit 20 k's, market-impact risk really starts increasing with each additional k. This assumes there is no
scaling -in/out.
Now, this is not to say that it should not be done, but this is definitely to say that a trader cannot freely enter/exit whole 20-contract positions in the same way he/she would a 10-contract position..that's all. It can be done, but the trading style has to change to accommodate.
...btw, I'm basing this on my own studies (data analysis) of
order flow , so I'm sure plenty of reasonable folks could differ with me and I make no warranties about what I'm saying. But I think you can get a fairly good idea of the answers you're looking for just by watching the reconstructed
tape and watching how the prices moves in accordance with the larger'ish consummated deals...at a given time of day. just my two cents.
In fact, I would say that understanding this behavior (and what should/should not happen) is a critical component of order flow trading. But mmmeh, at some point I would like to make the switch back to pure'er'ish discretionary trading and so it's on my mind
atm .
That's interesting. Seems to me most people would agree that 5-10 contracts is the limit.
And then once you get into 20 zone it's probably mostly a matter of scaling in yeah?
(Also icebergs, but that's for the future for me)
Just gonna be focused on making the most of my 1-lot for now!
Last Updated on November 7, 2017