Effect of daily VOLUME on YM behaviour..

Discussion in 'Trading' started by T.A.P, Feb 5, 2007.

  1. T.A.P



    I am relatively new to YM day-trading but am starting to see decent results. However I have noticed that I have trouble on low volume days - such as today.

    Hope this isnt too "Trading 101" but could anyone please confirm or deny my following suspicions on the effects of volume.

    When daily volumes are low:-

    * The market will be "choppy" and more unpredictable.
    * Hard to determine the medium term trend.
    * Pivots, support and resistance lines wont be "respected".
    * Its a good day to stay out of the market.

    Thanks much... appreciate any feedback.
  2. *Market maybe choppy but, more predictable because there's less traders. Therefore, it's generally low volatility, and less risk within well defined areas. Small money can't move big money markets. And big money, needs a lot of small money players to take advantage of so to speak. (hope that makes sense to you)

    *Hard to determine medium term trend..
    Possibly, of course the phrase "medium term trend" is subjective, so I guess it depends on your time frame and market in which you trade.

    *Pivots, support and resistance lines won't be "respected"..
    Again, subjective because your lines of S/R maybe different than mine. However, once S/R is established, those points are more reliable because there are less traders. People are creatures of habit so everyone will look to buy and sell at the general areas of interest. These traders will stay "within the lines' so to speak until a big player decides to break through.

    *It's a good day to stay out of the market.
    Well, assuming you like "FAST MONEY" then yes stay out..These type of markets will bore you. If your a trend following trader then yes again stay out. because these markets go nowhere.
    However, if you don't care about the "velocity of profit" or, if your NOT a trend trader. Then these markets are great because you really can't get hurt because there's little to no volatility and the areas are well defined.

    Again, someone will likely tell you different but, this is what I found to be true over the years
  3. Apache


    The YM doesn't trend? I've been watching it for a few months and it seems like it trends reasonably.

    What do you mean by the quoted part of your post? What markets would you recommend given what you said?
  4. I didn't say YM doesn't trend..The thread started believed the market on low volume days does not trend.

    Profits can be extracted out of any market if one knows how to trade it properly.
  5. bighog

    bighog Guest

    Where did this volume effects price, range etc nonsense come from? Who is spreading this silliness?

    If the goods are not moving out of the store, the price is either to high or people are not interested in the product.

    Change the price and traffic will pick up. NOT the other way around.

    Why is that so hard to understand?.. :p

    A question: if low volume days are good for range trading as stated how many will be throwing in mkt orders to catch a ride in and out of a small range? Sounds like a losing deal to me. (why? because 1 bad trade and you are lucky to break even at best )
  6. T.A.P


    Doc Green, thanks for your input. You obviously have more experience than I do and your comments make sense.

    However indulge me in my thought process on my the reason low vol days are choppy and less predictable....

    I am presuming that on low vol days the big players are not necesserily trading, possibly due to uncertainty on direction for the day, as with today when YM was bouncing along the top of a channel. This then leaves the market in hands of the smaller, probably less experienced traders (such as myself). Being less experienced they kick the market around randomly, not considering where the "lines" are that they are meant to stay within ie. Pivots etc. (just quickly I don't for a second believe that there are these rules about obeying pivots and SR lines, but as you say seasoned traders tend to observe them. )

    And because they are small no one of them can significantly move the market in one direction, only marginally before the next guy has a go, therefore randomness results.

    Does that makes sense or am I completely off track?
  7. Thankyou for a great post. I am a relative newb with YM and ES and find your incites interesting and congruent with my current knowledge. The general idea is that if only the locals are playing(low vol), then I think the pit fades most of the moves looking for a reversion to the mean. Today and yesterday, we had a range of only 6 pts in the ES.

    A trading behemoth on this board once said BO traders probably have a mean aversion to a mean reversion.:)
  8. lower volume days mean that (generally speaking), locals are in control vs. paper

    this DOES affect the way the market moves. sometimes, locals will do what one trader refers to as "guppy line" moves, where they will just continually whipsaw around a key reference level to try to stop as many people out as possible.

    i really enjoy trading days like this, because once you recognize them as such, you can use setups that capitalize on locals trading vs. institutional trading
  9. also, your point about means reversion is spot on

    frankly, this is a big reason why so many traders suck is that they are still playing the 90's trading model, even though the market has morphed to a means reversion model

    MOST days, a means reversion method is optimal for the YM (most of my setups fade the current price action).

    the key is recognizing when to stand aside and NOT fade a move (or pending move) which is a big part of my trading. i use numerous factors to determine the suitability of the move
  10. Know one is spreading anything. I am not a volume based trader..I merely basing my statements on the premise the thread starter initiated. (i.e. low Volume makes markets less predictable, inefficient, and choppy.)
    #10     Feb 5, 2007