Maximum trade size?

Chaim,

Still a good question.

It is possible to trade more than the ADV (average daily volume) with POV (percent of volume) on higher volume days: not all days will trade with one (average) volume.

But ultimately, I think the author made a mistake including some of those numbers in the table.

I tried to reread that chapter and distill-out what the author was doing in a post, with the main goal of including some of the equations that could easily be put into a spreadsheet.

Ultimately I decided not to do that here because the definition of the constants in the equations are too tedious for a post I think (e.g., do I use standard deviation or annualized standard devision in percent or decimal form?).

But once the constants are sorted out one could easily put this into a spreadsheet.

If you want to explore this more and buy the book, you could get the data in the table split out into Large-cap orders, Small-cap orders as well as buy and sell orders (after taking some time to maker sure you have the right constants without errors—including any author errors or omissions–for your important trades).

There are other papers and sources for the equation. Some of the equations vary a little. Yuval uses one of them above. I am not sure whether he has gotten this directly from a paper or whether he has adapted the constants to his own trading data: it is not hard to find your own constants with a regression. But either way this is a good example of what can be found in the literature and how it can be used.

Best,

Jim

From my perspective, you can trade much bigger then you think on thinly traded stocks!
20 Days Average > 200k → I would trade up to 200k in one position.

BUT: As Yuval pointed out: You need to spread your buys and sells over days (or even weeks).

Lately I use very small market (10 - 20 in 10 -15 Minutes, one by one) orders on Tradestation, very ofthen I get a good price between bid and ask.

Yes, its a lot of work, but ofthen the stock trades down, that are the days where I ramp up positions agressivly, even paying the ask.
(Vise versa on very good days when the strat gives me sell signals).

In a market like this, I rarly trade on the sell or buy signal of the strats 100%, I try to spread out my trades over a week or even longer.

If you do not have the time to do this, yes, then you need to go up on higher volumne stocks and I would not go higher then
the 5-10% of the 20 Day Average daily volumne.

Best Regards

Andreas