0
$\begingroup$

I'm investing in long term. By different means not related to this question, I've already decided that I want to buy or sell a particular instrument, but I'm not in such a hurry:

  • I'm still allowing a few days, say 2 to 5, to execute the operation at an optimized price.
  • If, at the end of the last day, I was not able to sell or buy the instrument, then I'll simply trade it at market price.

What methods are there to optimize the trading price? I'm looking for something like:

  • Use a number of periods (trading days, hours, whatever) based on the volatility, on the weather, on your mood...
  • Take the Moving Average (or EMA, or WMA, or whatever) over the number of periods you have to sell (or twice as much, or n as much).
  • Measure the standard deviation of the price around the moving average, or use Bollinger bands, or whatever.
  • Place a trade order at x% of the standard deviation, or place it just outside, or whatever.

I know I cannot hope to sell at the highest or buy at the lowest price every time. But is there a practice to maximize the probability of being closer to the best price? I also believe that this is not a trick, but a skill to train.

$\endgroup$
4
  • 1
    $\begingroup$ When people with no quant background (such as relatives) ask me this question I tell them: "do what I do, just buy it at the close of the first down day". This rule: (1) is simple (2) guarantees that you will buy it in just a few days (3) gives you a chance to buy at a price lower than current (with no guarantees of course) (4) avoids buying on a big up day when good news is announced and all the idiots are buying and you are chasing after them $\endgroup$
    – noob2
    Apr 27 '20 at 11:43
  • $\begingroup$ @noob2 - It looks like a simple rule and it does meet my requirements indeed. I like it. However, I would like to know what would be a general principle. Or, at least, the correct wording to look for the answers over the wide internet. $\endgroup$
    – jmgonet
    Apr 28 '20 at 4:29
  • 1
    $\begingroup$ You might look at articles with the words "optimal execution" in the title, especially Almgren's famous article. But they may have different assumptions than you have in mind for ex they allow breaking up the trade into smaller trades, instead of buying in 1 fell swoop. $\endgroup$
    – noob2
    Apr 28 '20 at 9:06
  • $\begingroup$ Thanks @noob2 for the comments. It is actually a good answer - a rule of thumb easy to put in practice, and a hint to go deeper. If you just put them in an answer, I'll accept it. $\endgroup$
    – jmgonet
    Apr 28 '20 at 12:31

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.