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New here, question about position sizing for illiquid assets
Just joined, been dabbling in a few things for a while, mostly FX and some larger caps. Getting into some less liquid small-cap equities and occasionally some fringe crypto projects ($DOGE, $SHIB, etc., purely speculative, I know). The standard 1-2% risk per trade feels off with these given the volatility and often wider spreads/slippage on entry/exit. For those trading highly illiquid or micro-cap stuff, how do you adjust your position sizing and stop-loss logic to account for the increased execution risk and potential for outsized moves? Or do you just flat out avoid anything that doesn't have decent volume?
2 comments · 5 points
For illiquid assets, you might consider position sizing based on a fixed monetary amount you're willing to lose, rather than a percentage of your total capital. The standard percentages often assume a certain level of liquidity for entry and exit, which just isn't there for micro-caps or fringe crypto.