How do you use volume in futures trading?
For futures and options, volume is based on how many contracts have changed hands. Traders look to volume to determine liquidity and combine changes in volume with technical indicators to make trading decisions.
Volume profile allows futures traders to see where the price is most likely to trade and the direction of price movement to a higher degree of probability. All of the charts and examples are going to be based on the S&P500 E-mini futures throughout this comprehensive guide.
You can distinguish buying volume from selling volume based on whether a transaction occurs at the bid price or the ask price. Changes in volume can give traders short-term indications of where the price might go next.
High trading volume often signals strong interest in a contract and can indicate the presence of significant market activity, either confirming a trend or signaling potential reversals.
Volume is the total number of options contracts bought and sold in a particular time period (for instance, a single day). It's calculated for every contract (by strike price, call, or put). Volume resets daily (or for the period studied).
Volume is reported for all futures contracts. It is calculated by counting the number of contracts that have been bought and sold over a given time.
A stock's volume is the number of shares traded in a given period. Traders and investors use the metric to gauge the interest in a security to help them make trading decisions. When trading volume is up—whether it's buying or selling volume—it means the security is gaining attention and trading activity is increasing.
High or increasing volume in an uptrend can signal a buying opportunity. Decreasing volume in an uptrend may suggest that it's time to sell and take profits. High or increasing volume in a downtrend can signal that it's best to stay on the sidelines.
They can be risky because their low volume leads to a lack of liquidity and ease in price manipulation. Smaller and newer companies are also disproportionately represented in low-volume stocks. Such companies can simply go belly up and leave investors with nothing.
What traders look for. In short, above average and/or increasing trading volume can signal that traders are truly committed to a price move, which you can see in Chart 1 below, where the price and volume lines are both increasing.
What futures are good to trade at night?
“A simple strategy would be to buy E-mini S&P 500 futures around 11:30 p.m. and sell them around 3:30 a.m. if the stock market dropped a lot during the prior U.S. trading day. Most brokers let you submit time-specific orders in advance, so you do not have to wake up in the middle of the night.”
In 2023, the top 5 futures strategies are spread trading, breakout trading, going long, pullback, and order flow trading. Futures trading offers profit chances but also risks from market swings. Understand your chosen strategy well and regularly adjust your portfolio.
- Trend Confirmation. A rising market should see rising volume. ...
- Exhaustion Moves and Volume. In a rising or falling market, we can see exhaustion moves. ...
- Bullish Signs. Volume can be useful in identifying bullish signs. ...
- Volume and Price Reversals. ...
- Volume and Breakouts vs. ...
- Volume History.
How Do You Interpret Volume-by-Price Bars? Volume-by-Price can be used to identify current support and resistance levels and estimate future support and resistance levels. Price zones with heavy volume reflect elevated interest levels that can influence future supply or demand (a.k.a. resistance or support).
Open interest and volume are related concepts, one key difference is that volume counts all contracts that have been traded, while open interest is a total of contracts that remain open in the market. Traders can think of open interest as the cash flowing to the market.
Definition of '80% Rule'
The 80% Rule is a Market Profile concept and strategy. If the market opens (or moves outside of the value area ) and then moves back into the value area for two consecutive 30-min-bars, then the 80% rule states that there is a high probability of completely filling the value area.
- Establish a trade plan.
- Protect your positions.
- Narrow your focus, but not too much.
- Pace your trading.
- Think long—and short.
- Learn from margin calls.
- Be patient.
Interest rates are one of the most important factors that affect futures prices; however, other factors, such as the underlying price, interest (dividend) income, storage costs, the risk-free rate, and convenience yield, play an important role in determining futures prices as well.
There are two most popular and widely used volume indicators: PVI (Positive Volume Index) and NVI (Negative Volume Index) that help in volume analysis. The positive volume index is used to measure the positive impact or increase in the trading volume.
- On-Balance Volume Indicator (OBV) ...
- Accumulation/ Distribution (A/D) ...
- Volume Relative Strength Index (RSI) ...
- Money Flow Index (MFI) ...
- Chaikin Money Flow (CMF) Indicator.
How do you understand volume?
Volume is defined as the space occupied within the boundaries of an object in three-dimensional space. It is also known as the capacity of the object.
A trading volume chart depicts the trading volumes of stock. It is a bar chart with volume bars of three colours. The volume bars show the rise/drop in volumes, and the colours indicate whether the stock closed higher or lower than or at the same price as the previous day.
promoting price discovery and liquidity. For the purposes of our comments, we accept the provisional definition of "thinly traded securities" as being any security with an average daily volume ("ADV") of less than 100,000 shares (although see our Comment #9 below fm; additional metrics to consider).
Description. The Average Volume is the total volume for a specified period divided by the number of bars in that same period.
High Volume Stocks and Low Volume Stocks
Meanwhile, low volume stocks are more thinly traded. There's no specific dividing line between the two. However, high volume stocks typically trade at a volume of 500,000 or more shares per day. Low volume stocks would be below that mark.
