Best method to place a big order

[Porper]

Just a question for the larger investors / traders. If you wanted to place a large order in a small cap stock, say for example a $50,000 order in a stock that often only traded say between 0-40 thousand dollars a day and was very price sensitive, what is the best way to do it.

For example just put the full order online or try and buy a few in weakness or do you ring a broker and leave it to them.

I am not in a position to do this but if I win the Lotto I may need to know

I would be very interested to hear from people who trade in large ammounts and their strategy in this situation.

 

[The Barbarian Investor]

Re: Best method to place a big (any) order.

No idea Porper..

But i was thinking of a similair post, such as "How to best enter the Market", leaving it up to a broker to place your order (good if you have a rapore with him, but if not then?), placing an on-line order at a selected price (and missing out if the market opens and moves up above your order price), or placing an at-market on-line order (which means the market is open anyway).

Anyone have any ideas on how to best eneter the the market also?

As an addition to Porpers post, the more ca$h involved the more critical the entry price as it could make a huge difference on potential profits..

The Barbarian Investor

 

[stefan]

Re: Best method to place a big order.

Normally you will not be able to enter an order using your online broker as they have limits in place. So you'll need to call them up if you want to do something out of the ordinary.

If the stock is low in volume then you don't have much of a choice. You will either have to enter an undisclosed bid which as such is disclosing that you plan to buy at least 100K worth of the stock and therefore most likely will have an impact immediatelly pushing the bid price up a tick or two. If your investment is below 100K then you can't do much except leaving it up to your broker or splitting the order up into smaller junks to buy online. It's a very difficult thing to achieve, really. If time is not an issue then you may spread the order over a week to keep the impact as low as possible.

If you leave it up to your broker, then you may benefit from crossed trades. However, unless you're trading more than $1million there is little benefit out of it. Your broker will have to trade on SEATS even for a crossed trade as long as the order is lower than 1 million. So for low volume stocks it's rather unlikely that a crossed trade can be done as there would probably be no seller around.

There is no trick that would allow you to do something more sophisticated.

Market orders will guarantee you an immediate fill, but you won't have much to say about the price you pay for the shares. You'll end up paying whatever it takes to fill your order immediatelly. So that wouldn't be my preferred option in any case except if you want to beat the crowd because you know something they don't.

Happy trading

Stefan

 

[rozella]

Re: Best method to place a big order.

You beat me to it stefan,

You would have to know something very special to enter a trade like that. If the stock trades $0 to $40k per day, you leave yourself wide open with price gapping.

rozella