Saturday, January 03, 2009

Tracking the Volume of Individual Trades in ES Futures

I was taking a look at the distribution of volume for the ES futures for trades during the first half of Friday's trading session. Of particular interest:

* Trades of 20 contracts or more made up about 7% of all trades, but accounted for about 56% of all volume in the ES contract;

* Trades of 10 contracts or more constituted a little less than 15% of all trades, but comprised a little over 70% of all volume;

* One-lot trades accounted for slightly under 50% of all trades, but only about 8% of total volume;

* Trades of 100 lots or greater accounted for only about .6% of all trades, but about 15% of total volume.

Many professional traders trade in lots of 100 contracts or more, but it is rare for these traders to execute trades in such large blocks. Rather, they employ clerks and/or automated algorithms that commonly break their blocks into smaller pieces of 10 contracts or more. While it is possible that a run-of-the-mill retail trader might be executing 20 contracts or more at a time, that is the exception, given high retail commissions. More often, these larger trades are placed by prop traders or are part of larger block executions from institutions.

Where are large trades hitting the market? At breakout levels? At the bid? At the market offer? Early in the day? By tracking *who* is in the market and when, we can infer important sentiment trends and shifts in the stock market.


What Every Short-Term Trader Should Know

Reading the Market