Sep 25, 2007

Volume quiz

When dealing with gappers (such as the ones below), what kind of volume would you rather be dealing with?

1) Set A
2) Set B

Set A

Set B

If you correctly answered set A, you probably didn't lose more than 3R today. Moral of the story... when trading gappers, look for candidates with unusually high volume. That's the beauty of gappers - built in momentum. Duh.

Set B: KSS, M


Rudy said...

A simple method to estimate trading volume by the hour:

Assume 50 Day average daily volume for a stock is 1mm. On a breakout from a trading range, you expect at the end of the trading day, at minimum, 2 times 50 day average volume, or 2mm.

There are 6.5 hours in a trading day. By dividing the the number of market hours by 6.5 hours,
you convert the number of hours as a percent of total market hours. By multiplying this percent by the expected end of day volume, you estimate the hourly virtual volume.

1. 10:30 15% 308k (1/6.5 hour x 2mm)
2. 11: 30 31% 615k (2/6.5 hour x 2mm)
3. 12:30 46% 923k (3/6.5 hour x 2mm)
4. 1:30 62% 1.23mm (4/6.5 hour x 2mm)
5. 2:30 77% 1.54mm (5/6.5 hour x 2mm)
6. 3:30 92% 1.85mm (6/6.5 hour x 2mm)
7. 4:00 100% 2.0mm (6.5/6.5 hour x 2mm)

OONR7 said...

rudy: nice time breakdown, thanks.

Eyal said...

I also look at nominal volume value. The higher the better. At least in the 100K's.

Tough out there today, choppy, at least for me. Hope you're doing well.

OONR7 said...

eyal... what do you mean by nominal volume value?

Hilzarie said...

Good words.