Contract volume

[Nick1984 10]

On any one market what would be the minimum number of contracts traded per day (on average) that you would prefer to see to create enough:

 

a) liquidity

b) normality of price distributions for statistical purposes such as MP theory etc.

 

Here in Aus our markets are comparatively low in volume compared to Asian or US markets with around 6-10 thousand contracts on average being traded per day.

 

Cheers guys

[The Bear 10]

On any one market what would be the minimum number of contracts traded per day (on average) that you would prefer to see to create enough:

 

a) liquidity

b) normality of price distributions for statistical purposes such as MP theory etc.

 

Here in Aus our markets are comparatively low in volume compared to Asian or US markets with around 6-10 thousand contracts on average being traded per day.

 

Cheers guys

 

For a) it depends on what kind of activity you are doing. Is this for intermediate term trading...meaning weeks holding time. Is this for intra-day trading? I don't understand what b) means.

[keymoo 10]

Depends on how much money you want to make and whether you are scalping, swing or position trading. A friend of mine moved from the Russell to the S&P 500 because of liquidity problems. You can expect anywhere from 20-100 contracts on the bid/ask on the Russell at any time and something like 1000-3000 on the S&P. These are very rough numbers.

 

The vol on your exchange does sound very low to me. It depends on how many contracts you want to trade and what style of trading you want to use.

[brownsfan019 17]

It really does depend on the type of trading you are doing, but for intraday trading, I like to see around 100,000+. There are some exceptions, like the QM Crude Oil contract, but you also have to be careful with the size you trade.

 

6000 contracts per day would never be on my radar screen. I need at least one more zero on that number to consider it.

[Nick1984 10]

Most of the local traders I know are swing traders so intraday liquidity doesnt mean to much to them.

 

Intraday traders are a rarer breed here. With low liquidity its hard to move your contracts.

 

 

 

What i mean in b) normality of price distribution i mean in terms of statistical distributions.

 

For those who follow MP theory and the price distribution "bell curve", you need a certain number of events to be recorded to assume any distribution follows a normal distribution. I'm not sure in general how normal an exchanges price distribution is but I'm pretty sure that for rudimentary statistical analysis of price distribution once you pass a high enough count of events (i.e contracts being traded) you can assume a normal distribution of price on any given day.

[The Bear 10]

Most of the local traders I know are swing traders so intraday liquidity doesnt mean to much to them.

 

Intraday traders are a rarer breed here. With low liquidity its hard to move your contracts.

 

 

 

What i mean in b) normality of price distribution i mean in terms of statistical distributions.

 

For those who follow MP theory and the price distribution "bell curve", you need a certain number of events to be recorded to assume any distribution follows a normal distribution. I'm not sure in general how normal an exchanges price distribution is but I'm pretty sure that for rudimentary statistical analysis of price distribution once you pass a high enough count of events (i.e contracts being traded) you can assume a normal distribution of price on any given day.

 

In my OPINION, It's very difficult to say though that liquidity concerns are directly related to # of contracts traded per day....for all contracts.

 

If you watch the DD contract (the big dow) this tracks YM very closely almost at all times....even on the BIG DROP day we just had.

 

I don't understand the technical reasons why an intra-day speculator like me can easily trade with the DD contract even though it does 60 contracts per day.

 

I think it depends on the type of liquidity provider (market making) in the contract.

 

Contact the exchange directly.

 

 

(I still have no idea what b) MP thoery means. It looks like engineering language to me. Alot of the stuff you guys talk about on this forum goes over the top of my head. (I have no university education) Nonetheless I learn alot from you guys on this forum. I'm a very basic kind of guy...'a speculator born from the street' so to say.) I barely trade with a system as it is but I can make money.

[Nick1984 10]

Very interesting view Bear. With only 60 contracts per day and you can still get in a good trade. Have you ever faced a situation where you can't get out of a position cause of that low turnover?

 

I've always viewed the situation as liquidity = volume of contracts goin through. More buyers and sellers doing thier thing makes liquidity. But after your post I guess that liquidity is a subjective thing!

 

I'm not familiar with the DD contracts cause I live in Australia, but I'd assume that if you have only 60 odd contracts goin through per day it must be some floor trader who creates the liquidity on his own by turning over 60 contracts a day and taking a small profit on the spread.

 

MP as in market profile. Theres a whole section dedicated to market profile if you care to have a look at it If you're interested in it and learning a bit of the lingo then its a great place to start. I am very new to MP myself and have been applying it to stocks on a very rudimentary basis without any dedicated software, just using excel lol. My analysis will be a bit off but it still is close enough for me to learn how to try and spot different market conditions.

 

I just bought the Mind over Markets book by Dalton et al. and its a fantastic first reference to MP, highly recommend it!

 

Mate don't worry bout your level of education either, if your making money consistently you must be doing something right! Just sit down and look at what you do so that you can develop your own system based on your own style. Trading is a continual learning process and I'm new to it myself. Just keep on filling your head with knowledge and experience

 

Best of luck to you!

[The Bear 10]

>Have you ever faced a situation where you can't get out of a position cause of >that low turnover?

 

No. There is always at least one (usually always more) contract on either side available. I've never seen it go to zero. I think it has a Lead Market Maker.

I'll get an answer for you though, I'll ask the fellow at CBOT and report back here why.

 

>But after your post I guess that liquidity is a subjective thing!

 

DD (Big Dow) is only listed on ECBOT (Electronic), so this may be a situation only relating to this type of contract. I wouldn't apply this rule to any exchange.

 

I'll take a look at this MP book one day.

 

>Mate don't worry bout your level of education either, if your making money >consistently you must be doing something right! Just sit down and look at >what you do so that you can develop your own system based on your own >style.

 

True, I guess I can't technically say I trade with no system...but I guess I made my own system. I have a very extensive trading plan now. Originally I was obsessed with 'setups' and had a very robotic mechanical way of trading. I was also overtrading because I would get alot of false setups. It didn't work for me, I was losing money. Then I just 'let myself go' and I can finally sleep at night without thinking of my swing positions.

 

 

I'll get back to you when I hear back from CBOT.

 

Check out FDAX futures....that might be in your time zone?

 

YM is gapping down on the 2-min. What's this?