New here, question about position sizing for illiquid assets

asked by u/vsiddiqui · 4d · 3 answers

Hey everyone, been lurking for a bit and finally decided to dive in. Mostly trade FX and some large-cap equities, but I've been dabbling in a few micro-cap OTC stocks and some less common altcoins. The liquidity can be brutal, and my usual position sizing rules ($EURUSD $SPY) feel completely inadequate; it's like trying to sip soup with a sieve. How do you guys adjust your risk when the bid/ask spread alone can eat half your target profit, or a 10k order moves the market 5%?

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Top answers

  • u/kittipongtechavimol· 17 pts· 4d

    ก็เข้าใจเลยครับ เรื่องสภาพคล่องในตลาดเล็กนี่เป็นปัญหาใหญ่จริงๆ ปกติแล้วคุณใช้เกณฑ์อะไรในการปรับขนาดสถานะเวลาเจอสินทรัพย์สภาพคล่องต่ำบ้างครับ เผื่อมีอะไรแลกเปลี่ยนกันได้

  • u/olenastoica· 4 pts· 4d

    That's a great point about illiquid assets. For OTC and altcoins, I've found it's not just about the bid/ask spread, but also the volume at different price points. Do you also consider the depth of market (DOM) when you're sizing positions, or is it primarily a spread-based adjustment for you?

  • u/tran62· 0 pts· 4d

    Illiquid assets require a different approach. Standard position sizing often overlooks the execution risk inherent in thinly traded markets, which can be far more impactful than the notional value.

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