I wouldn't worry too much about that right now. Let that be a future problem, consideration, if and when you get there. Assuming you're trading something mainstream and very liquid...the market has ways of accommodating you always without much price gyration or stallment
I think 10% of average volume at most. 5% might be on the safer side. It depends though. I suggest watching the tape (time and sales) and seeing the order sizes that print on there because it could be higher or lower depending on the product you're trading.
PLEASE don't listen to people who are saying 5,10,20 or even 50%. They have no idea what they are talking about. I once inherited a strategy which traded about 5% of daily volumes in a particular futures contract (Eurodollar) until I slowed it down. Trust me you don't want to do that. Here is a paper from someone else who has actually worked somewhere that trades in large volumes https://spinup-000d1a-wp-offload-me...tent/uploads/sites/3/2021/08/Trading-Cost.pdf Go to figure 5 on page pdf page 62, page labelled T14. I've pasted it in below. These results are for equities but there will be similar patterns in futures.
Thank you for your suggestion. But we are not talking about the same thing, you are saying that your trading volume reaches 5% of your daily trading volume, I am talking about trading immediately within certain minutes (when my strategy signals). For example, ES futures in the first 4 hours after the opening, the liquidity is only about 50 contracts/min, but during the most active period, it can reach 2000/min. When my strategy sends a signal, it could be the former(50/min) or the latter(2000/min), and I hope to complete a transaction within 1-2 minutes, so my trading volume will never exceed 1% per day. so what I am thinking is. how can I control my position (day trading strategy) since market liquidity is so different during the different time.
What you are specifically asking for can only be determined by specially putting it to the test ... yourself.
You've been given good answers but your question suffers from Sorites paradox: The sorites paradox (/soʊˈraɪtiːz/),[1] sometimes known as the paradox of the heap, is a paradox that results from vague predicates.[2] Figure out what you mean by this: And then determine what you're comfortable with. You have to make up your own mind when it comes to subjective matters.
Lots of good points here. I’d say: for one-off execution, ~5–10% of short-term volume (10–20 contracts here) can work if liquidity is decent. For systematic trading or repeated orders, much lower sizes (sub-1%) are safer to avoid impact. Always depends on market depth and urgency.
You don't understand, this is a way to estimate your strategy capacity. Most people say their strategy's capacity is $1M, $10M, or $1B, but I think this way of describing it is actually very vague. For example, if someone says their strategy's capacity is $10M, does that mean exceeding $10M—say, $11M—would reduce my returns, or would the returns turn negative? These are completely different concepts. If my strategy yields a 200% return at $10M and only drops to 10% (less than the S&P 500 index) when reaching $100M, then the correct statement shouldn’t be "my strategy’s capacity is $10M." Instead, it should be that $10M is the inflection point for the strategy’s returns, after which the returns decline—but that doesn’t mean the strategy fails. It only fails beyond $100M. If a strategy already accounts for limit order execution failures and slippage (which always happen), then the real factor affecting the strategy is the market impact of the capital. what I am talking above is not a "what makes me comfortable, it is subjective matters" question. it is a an important step to evaluate a strategy. If a person has experience programming a complete trading strategy independently (Not just signals, including fund management, position management, order execution, iteration and optimization methods), he will know what I am talking about. I think most people don't care this question because they are still trading according to "feeling".
Exactly what is "a way to estimate your strategy capacity"? Can you show us? Don't worry, it's rhetorical. My point is the people who answered 0 are just as correct as the ones who suggested there's some known fixed curve. Of course it is, just like your question. You asked what's "safe" and now are suggesting there's some point where "capacity is exceeded"... but you neglect that real numbers are not countably infinite. You can do some math to approximate how much the capacity tails off, sure... but no one can tell you what you're comfortable with. Obviously you don't want to go past the point where the strategy's risk adjusted rewards go negative. But, only you can determine where you want to be when that number ∈ ℝ>0. What's obvious to one person isn't obvious to others. Again, you're asking a question that is plagued w/ subjectivity and imprecision. So... you won't get an answer that satisfies you.