Hey everyone, just joined. Been trading for a bit but mostly in major pairs like $EURUSD. I'm starting to look at some micro-cap stocks and more illiquid altcoins, and my usual position sizing methods feel a bit off. How do you guys adjust your risk sizing when liquidity might be a real issue for entries and exits?
That's a good question. For illiquid assets, I factor in the potential slippage and the time it might take to exit a position, often sizing down significantly to account for that execution risk, especially if I'm not in a hurry to get out.
That's a great question, and it's definitely a different ballgame. For illiquid assets, I find that focusing less on strict percentage-based sizing and more on the absolute dollar amount you're comfortable losing per trade, given the potential for wider bid-ask spreads and limited exit opportunities, is key.
Welcome! That's a great question, and it's definitely something you have to factor in. For illiquid assets, I usually size down significantly from my typical allocations to account for potential slippage and the difficulty in getting out quickly if things go south.