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Don Kaufman here. |
Let's cut through the noise and talk about something that separates the pros from the amateurs - trading volume. |
While everyone's obsessing over price moves like teenagers chasing the latest TikTok trend, the smart money is watching volume like a hawk watches its prey. |
The Market's Vital Signs
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Think about it like this: would you trust a restaurant review if the place was completely empty? |
You wouldn't buy a house without checking the foundation, so why trade without checking volume? |
Yesterday, we didn't even hit a million contracts in the S&Ps - that's like a ghost town in trading terms. |
When volume is this light, price moves can be as meaningful as a screen door on a submarine. |
Volume Deep Dive: The Real Deal |
Let me break this down into something you can actually use, and no, this isn't like those fancy trading seminars where they serve you cold coffee and hot promises:
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Check the 30-day average daily volume (ADV) - this is your baseline, your market's heartbeat Volume 20% below ADV? That's your warning light, like when your car's "check engine" light comes on Volume 50% above ADV? Now we're talking real institutional money - the big boys are playing Options volume under 47 million contracts? That's what we saw yesterday, folks - as exciting as watching paint dry
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For example, PLTR trades on average 69.18 million shares today, but by 12 PM ET, it had already reached 56.2 million shares. |
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Time-of-Day Volume Patterns
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The market has a rhythm, like your morning coffee routine (and trust me, I know about coffee): |
First 30 minutes: Expect 15-20% of daily volume (the morning caffeine kick) Mid-day: Usually lighter (that's when the robots take over and traders hit the lunch buffet) Last hour: Another 15-20% surge (the closing bell scramble, like last call at your favorite bar)
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Options Volume: The Smart Money's Footprints
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Here's where it gets juicier than a well-done trading thesis: |
Watch options volume compared to open interest - it's like checking if people are actually dancing at the party Sudden spikes in puts or calls? Someone knows something, like your neighbor buying flood insurance on a sunny day Look for unusual options activity - that's often where the real story is hiding Compare options volume to its 30-day average (just like regular volume)
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Tools of the Trade |
Don't go into battle without your weapons, folks. That's like bringing a butter knife to a gunfight:
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Set up volume alerts (I want to know when volume spikes 200% above normal) Use volume by price indicators (shows you where the real money fought) Watch level 2 data for block trades (the elephant tracks in the jungle) Keep an eye on dark pool activity (where the big money tries to hide)
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The Big Picture: Putting It All Together
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When you see a big market move, ask yourself these questions faster than a day trader spots a momentum stock: |
Is regular trading volume supporting this move? How's the options volume looking? Are institutional-size block trades showing up? Is the volume pattern normal for this time of day?
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The Bottom Line
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Trading without watching volume is like trying to drive blindfolded through Manhattan at rush hour - you might get lucky for a while, but eventually, you're gonna hit something expensive. |
And trust me, those margin calls hurt worse than your first CrossFit session. |
Remember what we saw today - light volume in the S&Ps, only 47 million option contracts. |
That's not enough energy to power a light bulb, let alone a real market move. |
When volume is this light, even seemingly big moves can be as reliable as a weatherman's forecast during hurricane season. |
Don't let another day go by feeling stuck or overwhelmed. |
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To your success, |
Don Kaufman |
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