The average daily volume for the stock indexes continues to be extremely low, and this low volume continues to plague day trading efforts if you don’t understand how to properly read a price chart. The average daily volume for stocks in August is the lowest since 2007, so we are seeing a five year low in overall trading volume, and that’s a big contributor to the consistent ranging we have seen for the most part if the ES or mini S&P. Even though the ES has spent a lot of time ranging over the summer, we have still seen a slow but steady move to four year highs, so we are rallying on very low volume, which is not a great sign for the future in our opinion.
It seems that investors continue to pull funds from stocks and they are placing them in bonds at a steady pace, so we would suggest that retail traders and investors are still sour on stocks for now. Of course this is the off season for Wall Street and most traders and trading firms will not be back at full staff until after the Labor Day holiday period is over. Most professional traders and Wall Street types take their vacations in the summer, with a large number of them vacationing during the month of August, so lower volume in August is nothing new, its just much lower this year than in the past five years, so it’s making things extremely difficult for many day traders.
Here is an excerpt from an article that we found at www.cnbc.com and it discusses the low volume we are experiencing.
A summer August is typically never that active on Wall Street. However, this month’s volume is on track to be extraordinary light, calling into question the legitimacy of the recent rise in stocks and threatening the profits of some market’s participants.
Average daily volume this month is 5.7 billion shares, the lowest monthly average since September 2007, according to a report from Sandler O’Neill & Partners. Three of the five days this year when volume was below $5 billion occurred during this month alone. The other two days preceded major holidays.
“It’s only likely to get worse in the next two weeks,” said Richard Repetto, the firm’s exchange and trading analyst, in the report. “Despite rising equity markets, investor confidence remains low.” You can find the rest of the original article here.
Overall, there are many other contributing factors that are creating the low volume, but regardless of why the volume is low, it is causing the market to appear jittery, with a lot of ranging, followed by sudden knee jerk moves that catch many unsuspecting traders off guard. One point we would like to make is that we actually like range days, as they can be so predictable if you know how to trade them. It’s difficult for many traders to sell the high of the day or buy the low of the day, but that’s what you must learn to do in order to make money in the markets.
If you would like to learn how to use our price action day trading strategies to make money in the stock indexes during these low volume ranging days, or even during strong trend days, then we can show you how. Once a trader learns how to read a price chart, they will then have a better understanding of what is going on in front of them as prices print to their chart. When there is a sudden move on their chart, they won’t be caught off guard or left wondering why prices just did what they did on their chart. They will know why prices moved and they will also have a solid understanding of where prices are likely headed next.
A true lack of understanding of price action is the real reason low volume continues to plague day trading efforts. Don’t let low volume or any other natural part of the markets plague your trading results any longer. Get started learning our price action trading system and learn to read a price chart like a professional and change your trading results for the better once and for all! While it’s not always easy to learn, price action trading is the only way a trader can learn to profit in the markets on a consistent basis, day in and day out. Armed with solid information on price action, along with hard work and persistence, you can learn to read a price chart. Find out why price action day trading is the only way to make money consistently in today’s markets at http://priceactiontradingsystem.com/pats-price-action-trading-manual/.