Last week when Richard was in the trading room he commented on how slow the markets were moving. Richard generally trades the evening market (based on eastern time). If you have ever pursued the Asian market in the evening you will notice they move very slow and, compared to the US market, the volume is quite low. Richard went on to say that the market movement was more like the Asian market. This caused me to look around and do some research as to what is going on.
I checked the CME (Chicago Mechantile Exchange) web site and compared some volume numbers from their website to glean some information. The CME is the worlds largest derivative market by far it includes the Nymex the Chicago Board of Trade and the CME itself. Gail has, through her research, shown that the higher the volume the larger the trading range of the instrument, with the exception of the Emini S&P and I personally think the US T Bond futures. These markets have huge volume and compared to the volume a relatively small trading range. These two market, however, are the best place for people who are trading large lots of contracts. Having said that a trader should resolve themselves to getting very few clipper 2 and clipper 3 trades if trading these markets.
While the summer months are notoriously low volume months and September generally shows an increase in market volume, you will notice on the CME Volume Report that volume is down 29.3% September 2011 compared to September 2012. Please note that these volume numbers includes futures and options. Also, note that the year to date 2011 compared to the year to date 2012 shows a 21.5% decrease in volume.
As I stated before Gail’s work has shown that for the most part low volume is correlated to a reduced trading range of an instrument. So the question is why. Well, that’s a good and valid question and I can only speculate as to why. Some reasons I would list would start with the failure of MF Global, and PFG and the down right scarey lack of a reasonable resolution to these debacles. Then we can flow right into the uncertainty of a “fiscal cliff”, and the melt down of the Euro. These are naming a few of the reasons that any one can be to blame for such a volume fade. However the bottom line is volume is down and price action is slow and as traders it is our business to make money trading, so, how do we make money day in day out.
My answer: THD indicators combined with risk reward management and a quality trading plan. These tools are still working!
Thank you for enduring my ramblings if you have any comments feel fee to contact me at