Wednesday, February 24, 2010

Relative Volume Update: Gauging Market Participation

Volume is important in that it gives us some idea of the degree of institutional participation in market moves. Volume also correlates very highly with volatility and thus gives us an idea of how far markets are likely to move directionally.

One way to determine whether volume is high or low during the day is to compare the volume at a given time period with the average volume for that same period. I call this relative volume. If relative volume is high, we can expect markets to move more than average. Low relative volumes provide alerts for markets that are likely to be slow and rangebound.

Here are the relative volume numbers for the ES contract that I use for trading this week. These are median volumes over the past 12 full trading sessions from 2/4 through 2/22. All times are Central Time in the U.S. and each 15-minute period begins with the time shown:

8:30 - 136,909
8:45 - 90,226
9:00 - 99, 162
9:15 - 79,342
9:30 - 81,984
9:45 - 64,960
10:00 - 71,259
10:15 - 54,271
10:30 - 63,874
10:45 - 41,411
11:00 - 51,194
11:15 - 48,285
11:30 - 28,964
11:45 - 23,345
12:00 - 38,385
12:15 - 43,116
12:30 - 45,863
12:45 - 42,296
13:00 - 38,460
13:15 - 45,881
13:30 - 55,808
13:45 - 46,632
14:00 - 57,238
14:15 - 49,700
14:30 - 76,879
14:45 - 105,354
15:00 - 107,443

For more on relative volume and its use, please see the posts below:

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