Tuesday, April 21, 2009

Late Day Volume Surges: One Way to End Your Trading Day Profitably

Hats off to this post from Daily Options Report on how the leveraged ETFs are affecting the last hour of trading in the stock market.

If you go back to my post on relative volume, you'll see that average volume is actually highest at the end of the trading day, not the beginning, as it once was. Market Tells makes the excellent point that this dynamic may be contributing to increased intraday herding behavior.

A closer look at my relative volume post shows that the standard deviation of volume is also significantly higher late in the day than early on. That means that we're more likely to see volume extremes (and hence volatility extremes) late in the trading day. This has important implications for late day trending and reversal moves. Catching those late day volume surges might lead to very good trades to finish your day.