A No-BS Guide to Trading Volume

(how to read the market's pulse)                                                                                                                                                                                                                                                                                                                                                                                                                 December 03, 2024 | [Read Online]( 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 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: - Daily Volume Basics - 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 For example, PLTR trades on average 69.18 million shares today, but by 12 PM ET, it had already reached 56.2 million shares. - Time-of-Day Volume Patterns 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) - Options Volume: The Smart Money's Footprints 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) Tools of the Trade Don't go into battle without your weapons, folks. That's like bringing a butter knife to a gunfight: - 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) The Big Picture: Putting It All Together 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? The Bottom Line 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. [For just $7, you can unlock 30 days of TheoTrade](—the strategies, the tools, and the support you need to succeed. Let’s make trading work for you. [Click here to start your journey today.]( To your success, Don Kaufman [fb]( [tw]( [ig]( [yt]( Update your email preferences or unsubscribe [here]( © 2024 Don Kaufman - TheoTrade PO Box 24790 Christiansted, Virgin Islands 00824, Virgin Islands, U.S. [Terms of Service](