Info!! Useful Trading Tools - Business Office Two: Volume

The starting fourth dimension postal service inward this series covered the NYSE TICK together with how it offers insights into who is participating inward markets.  In this post, we'll direct keep a human face at what tin sack hold upwards learned from raw book data.

The inward a higher house nautical chart covers today's trading inward the belatedly forenoon inward the S&P 500 e-mini (ES) futures.  Notice how nosotros were trading inward a narrow make for much of the fourth dimension alongside book averaging nearly a brace chiliad contracts traded per minute.  At 11:49 AM, nosotros got a menstruation to the upside, alongside over 9400 contracts traded that minute.  NYSE TICK hitting a high of 587 during that infinitesimal together with nosotros traded correct dorsum into the make subsequently.

What did that nation you?

Buyers came inward together with couldn't elevator the marketplace position higher.  There was a relatively large buying flow, but it could non heighten the TICK to statistically important levels.  That tells us that the buying was non heavy across the total stock universe.  It was aggressive buying (significant volume), but it could non generate important directional movement.  

Not a bad slice of marketplace position information.

Sure enough, at 11:58 AM--just nine minutes later--the ES contract prints over 9900 contracts during the infinitesimal together with volatility expands, breaking us out of the range.  Moreover, NYSE TICK plunged to -797 together with and then to -997 the next minute.  That is significantly wide selling on important marketplace position volume.  

In Market Profile terms, nosotros direct keep rejected value inward the prior make together with at i time are trending to institute a fresh, lower value area.  The fact that the displace out of the make occurred alongside significant, wide marketplace position participation is an indication that directional participants direct keep taken command of the market.  As yous know from the ease of the hateful solar daytime session, they did indeed direct keep command together with nosotros shut nigh the lows of the day.

It is mutual for traders to advert to the minute-by-minute drive of the marketplace position equally "noise".  For those who sympathise the dynamics of toll action, however, at that topographic point tin sack hold upwards of import signals amidst the noise.  When nosotros direct keep depression to average volume, nosotros know that marketplace position makers are dominant together with directional participants are relatively inactive.  When nosotros direct keep significantly expanded volume, nosotros know that directional traders direct keep taken the marketplace position reins together with nosotros tin sack suit expectations accordingly.  Influenza A virus subtype H5N1 meaningful shift inward book is ofttimes a overnice nation for meaningful shifts inward trading patterns.

Further Reading:  Relative Volume together with Volatility