Liquidity Should Be The No.1 Criteria for Investors on C2

Trading and Markets
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Not sure how many investors get caught up in illiquid stocks, where the actual fill prices (under autotrade) are often distant from the original limit/entry price issued by the trade-leader…

C2 tries to solve this through something called VWAP (Volume Weighted Average Price), which is fair-play on their part but not really an ideal solution. Often, when trading illiquid stocks, the limit price entry triggered by the trade-leader, instantly eats up all the available (very limited) stock in the market for a few, and then remaining investors who autotrade are left with ‘market-fill’ orders, which in some cases are so far away from the original intended entry, that in reality they would never trade at these heavily above-limit prices.

It is a conundrum, for investors, trade leaders, and I suspect C2 - one which they do try hard to resolve and explain, but alas, the market is the market, and the problem is not the trade-leader or C2, but ‘illiquid’ stocks. It is one of the reasons I recommend investors consider carefully when selecting strategies, and opt for higher-liquidity markets, as opposed to small/micro-cap stocks. One strategy I noticed yesterday which had been going well for many weeks (Fission Fund) suddenly traded a small-cap chinese stock, and as the stock tanked, exit fills on this ranged by an outrageous 20%. I try to build strategies which take this into account (as other trade-leaders should in my opinion), as it would enhance the qualititative appeal of C2…

For example, one strategy I run focuses 100% on only S&P500 stocks, which has worked well for me (see below). Although the strategy is only a month old, I do pay attention to autotrade fills for my subs, and have noted the price ramains fairly consistent across autotraders, purely due to the higher volume traded in S&P stocks…

Liquidity is an often overlooked, but important consideration when selecting strategies. I thought I would put this out there, hopefully encourage a constructive discussion…

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I don’t know about “#1” criteria (performance??), but I’d 100% agree its an issue.

My old forex scalping system would execute a sale on one sub and the other would suddenly become market fill. When you’re scalping for 3 pips in some cases and you get a market fill order that is 2-3 pips away, it made the system impossible to run and I had to shut it down.

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Do agree that it is very important.

You can’t trade low volume stocks with followers. It is like those penny stock “pump and dump” schemes.
You can see same with low volume futures (oats, rough rice, platinum, even meats) where even 5 or more contracts do create big slippage, that eats profit over time.

I would recommend stocks with more than 1 M stocks daily volume traded on last 60 days.
And being part of SP500, or NQ100 or DJ 30.

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Sorry, I meant high priority in the context of using C2 (or any copy/clone autotrade platform) :slight_smile: . It is of course not the highest priority in an overall strategy (where fundamentals, technicals, hedging, position sizing, etc., take precedence).

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I agree that liquidity is very important. But wouldn’t you all agree that the longer the hold period for trades the less the liquidity matters? If you are going to be day trading and scalping with lots of subscribers then you will certainly need to trade items with lots of liquidity. However, if you are in search of (and finding) good long term holds with longer term growth potential that last for months at a time, the liquidity doesn’t matter as much. It still matters - no doubt! I just think that when evaluating strategies to follow or publish one must consider the fact that liquidity matters, but if your strategy has a longer time horizon it may not matter as much.