Today’s trade execution report from Interactive Brokers showed that I bought 3 shares of a company, and since the share price is in the single digits, at this rate of accumulation I will more likely die of old age than getting my desired allocation level. The slap in the face is that the stock closed at around 3.7% above that level. My total portfolio allocation in this particular stock is currently 1% and my sense of the tape suggests that somebody else is out there very slowly gobbling up shares as well as myself, while the sellers are just dumping them with market orders here and there. This probably means the stock price has bottomed out for now.
Since the stock is relatively thinly traded (daily average volume is around $100,000 traded), I have an algorithm running that breaks my order into relatively small pieces. A market order to get my desired allocation would be suicidally inefficient – I’d probably spike the stock price a good 20% by doing so, which requires breaking down the order and being patient. As each piece is sold into, the price of the order declines by about two percent immediately, but over the course of a day, the bid price notches up slightly every time increment. This is incredibly easy to do in Interactive Brokers and is the simplest type of algorithm to employ when not dealing with million dollar trade sizes. It saves so much money on trade execution it is unbelievable.