Basic Question About Volume

Volume swells at the open an close because many model based traders wish to capture the opening or closing price as that is what their historical model returns are based upon. As they may model on end of day data, they try and trade these prices. The traders are often bench-marked on capturing this price. Many big orders are based on VWAP also and volume attracts volume...again traders must try to match the volume weighted average price and as most volume occurs at open and close, big chunks of VWAP orders will occur then. Bank order desks are generally flooded with Market on Close (MOC) and Market on Open (MOO) orders and it's a challenge to manage these. Most of these order desk now rely on synthetic order entry logic to manage this order flow.
 
The only use for volume imo is to discover stocks that have an unusual surge above the daily average value. Then you can watch for price to show you a trade..
 
the behemoths need to do their volume at the beginning and end of the day (really the end of the day) for size reasons - the big guys know this is when the volume will be there for certain. When you are blackrock for example, or a large hedge fund with a huge position, if you come in with a giant order you will move the market too much - and the wrong way. (your fills will suck). This where dark pools have tried to compete - herding larger buyers and sellers on big lots.

So the saying goes that amateurs trade at the opening and the pros trade at the close. You really don't think about these things unless you are moving big money. They can't afford to slice through bids and offers like a hot knife through butter. This is where smaller traders and investors have a distinct advantage - you can trade whenever you want. The big money doesn't have that luxury.
 
I dont think computers make decisions or trades on there own, people which want huge amounts run buy and sell programs, that will buy or sell large volume based on what ever rules there told, they get more aggressive into the close thats all.
 
WaxOn said:
the behemoths need to do their volume at the beginning and end of the day (really the end of the day) for size reasons - the big guys know this is when the volume will be there for certain. When you are blackrock for example, or a large hedge fund with a huge position, if you come in with a giant order you will move the market too much - and the wrong way. (your fills will suck). This where dark pools have tried to compete - herding larger buyers and sellers on big lots.

So the saying goes that amateurs trade at the opening and the pros trade at the close. You really don't think about these things unless you are moving big money. They can't afford to slice through bids and offers like a hot knife through butter. This is where smaller traders and investors have a distinct advantage - you can trade whenever you want. The big money doesn't have that luxury.
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I disagree, greatest accumulation of overall volume is normally mornings, Pro's got out on the close and re-enter in opening area. The chart shows high volume on close and heavy volume for 2 bars and being it Friday, heavier than most as many who swing trade getting out as they don't want over the weekend exposure. I day trade first 75 minutes doing few hundred ES at a clip and market gobbles it like nothing and I am just hitting bids/asks, gets tougher after 90 minutes of morning session.

I think small traders lose the most as they more likely to trade afternoons thinking they can dig themselves out of the hole from mornings and lunch, they let a few good winners go by in ES in mornings and then were they grow balls they start trading and take some losses, they lose more at lunch and get creamed in afternoon cause they never learned how to trade or trade chop, my favorite. Buy I do nicely just trading the 75 minutes and don't have to watch the screen, letting automation do it's thing.
 

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Maybe i misunderstood the question. i thought he was talking equities. when trying to key what the big guys are accumulating / distributing which names.

Clearly there is a lot of volume in the morning as the markets digest overnight news and react to what futures have done in response to overseas mets. Day traders and arbs open new positions in the morning. Margin calls. yada, yada.

Volume attracts volume. Mutual funds still being around $15t of assets (thanks archaic 401k rules) and typically trade near the market close closing price better aligns their performance with the index. So while the opening is stereotypically more of a chaotic "trader on trader" and "amateur retail" price discovery, the close is where the 800lb do real underlying volume. Futures traders often overlook how the underlying is important to the market - because they think they are the entire market - not just a tool used by asset managers. ( i have traded futures for 25 years so i'm not a spectator). The open is chaotic and that may be great to pick off other traders and trade the chop. That is tactical and opportunistic, but it does not explain why what happens and when (strategic).

When futures mkt is open and cash equity market closed - the big guys aren't there because the close won't be there and the rest is just a circle jerk (sans any global event).

So now that we know the volume certainty at the end of the day are always real buyers / sellers (and not day trader / day trader or HFT zero sum game) then the close is ripe for arbs etc, and now the big guys are in the market, and we have a real trading day.

Opening volume is lame if the close is expected to be lame. The close is king.
 
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