Volume in the broad market is a very important measure of market interest. On days when you don’t have enough volume, a lot of stocks will have a difficult time behaving technically, and we need them to behave technically to trade them properly. Therefore, it is extremely important that we have a measurement to look at early in the trading session that gives us an idea of whether a lot of people are trading or if we’re alone.
Since we trade a lot more technology and NASDAQ stocks than listed stocks, I have always used the NASDAQ volume as a guide to my trading. I look at the 30-minute and the 60-minute mark of the session to see how volume is going. Over time, I have made minor adjustments to the numbers that I like to see, but currently I use 250 million after 30 minutes and 450 million after 60 minutes as my guides. Those are average numbers, meaning you can expect average activity in the markets if you hit that level or higher, and that is good enough for trading purposes. Anything significantly under those numbers is trouble, and your trade size should be lowered accordingly.
If you hit 250 and 450 at the 30- and 60-minute marks, respectively, the market is typically on-track for a 2 billion share day of NASDAQ trading, which is good, average volume over the last several years.
What are examples of days that tend to have less volume than usual? Summer Fridays. Days before key news. Holiday periods.
Because this information is so important, we post notices to the Stock feed of the Tradesight Messenger right at 10:00 am EST and 10:30 am EST to let our subscribers know how volume is tracking. In addition, these items are posted to our Twitter feed.
The last few weeks of the year are typically characterized by lighter-than-normal volume due to the variety of Holidays around the globe. The last week of the year, in particular, typically sees a 20% drop-off in volume and many traders take that week off. However, even earlier in December can see lighter volume, so it is important to pay attention and track this number. We are currently experiencing light volume, despite the fact that this is triple expiration week in December. Usually, volume drops off AFTER this Friday, but we saw only 1.7 billion NASDAQ shares the last two days, which is very light.
If the volume after 60 minutes is less than 400 million (which is not close to the 450 million average number that we like to see); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES we try to post a humorous title for the volume warning in the Messenger, just to give people a little something to chuckle about since the market isn’t that interesting.
Be sure to track volume and adjust your trading accordingly. The market doesn’t care about you, but you should care about the market if you want to be successful.