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Volume on futures
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Volume on futures

  #1 (permalink)
Trading Apprentice
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Volume on futures

I need something cleared, does futures volume have any effect on price movement on any of the indices? I looked at the NDX chart today and volume is quite different from the NQ so I am just wondering if looking at the contract volume has any effect in price movement whatsoever since we are buying contracts to own and not really shares in itself! I understand that futures contract has a higher liquidity but I want to know if has any effect on price movement, something tells me that it doesn't.

Regards,
Ed

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  #2 (permalink)
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  #3 (permalink)
Market Wizard
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idude View Post
I need something cleared, does futures volume have any effect on price movement on any of the indices? I looked at the NDX chart today and volume is quite different from the NQ so I am just wondering if looking at the contract volume has any effect in price movement whatsoever since we are buying contracts to own and not really shares in itself! I understand that futures contract has a higher liquidity but I want to know if has any effect on price movement, something tells me that it doesn't.

Regards,
Ed

NDX doesn't have any real volume since it is no tradeable asset but only a calculatory index. Any "NDX volume"
that you see is an artificial number, e.g. gained by adding up a volume sample or all volumes of its constituents.
So forget about the "NDX volume".

NQ in contrast is a tradeable asset and therefore it has discrete ticks and volumes associated with any of its trades.
The sum of NQ tick volumes is regular NQ volume.

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  #4 (permalink)
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idude View Post
I need something cleared, does futures volume have any effect on price movement on any of the indices? I looked at the NDX chart today and volume is quite different from the NQ so I am just wondering if looking at the contract volume has any effect in price movement whatsoever since we are buying contracts to own and not really shares in itself! I understand that futures contract has a higher liquidity but I want to know if has any effect on price movement, something tells me that it doesn't.

Regards,
Ed

I think it is like this: The cash indexes have an effect on the Index Futures. For example NASDAQ futures, NQ, is based off the underlying NASDAQ 100 stock index. Arbitrage algos will have a large effect here keeping NQ and a basket of, I'm guessing the heaviest weighted stocks in the NASDAQ 100 in line with each other, or maybe all 100, or perhaps just the stocks from the 100 that are deviating.

Ron

It is an axiomatic fact that while you meditate you are speaking with your own spirit. In that state of mind you put certain questions to your spirit and the spirit answers: the light breaks forth and the reality is revealed.
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Buy Low And Sell High (read left to right or right to left....lol)
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  #5 (permalink)
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choke35 View Post
NDX doesn't have any real volume since it is no tradeable asset but only a calculatory index.


So if I'm buying one NQ contract, what am I buying really? A Gamble?

So looking at volume is worthless when it comes to forecast price movement since it has no effect whatsoever on the index, am I correct?

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  #6 (permalink)
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idude View Post
So looking at volume is worthless when it comes to forecast price movement since it has no effect whatsoever on the index, am I correct?


No.

You're not really correct or incorrect: you're confused. Not a criticism - I realise that's why you're asking!

The price-movements in the Nasdaq are determined by imbalances between buying pressure and selling pressure of the Nasdaq. The price-movements in Nasdaq futures are determined by imbalances between buying pressure and selling pressure of Nasdaq futures. They're separate instruments, with their own markets. (They happen to be very closely correlated, partly because of arbitrage-HFT's in the market, which typically make any significant differences very brief, but that's a different matter altogether).

Saying the "volume has no effect on the index" (or indeed saying that "volume has an effect on the index") is a "category error".

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  #7 (permalink)
Market Wizard
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idude View Post
So if I'm buying one NQ contract, what am I buying really? A Gamble?

So looking at volume is worthless when it comes to forecast price movement since it has no effect whatsoever on the index, am I correct?

You buy or sell an obligatory, cash-settled contract with a finite duration.
For basics see: https://en.wikipedia.org/wiki/Futures_contract

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  #8 (permalink)
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idude View Post
So if I'm buying one NQ contract, what am I buying really? A Gamble?



So looking at volume is worthless when it comes to forecast price movement since it has no effect whatsoever on the index, am I correct?


I'm going to offer an answer here.....

You have a choice. If you have an edge in the market and therefore probabilities in your favor you are gambling to the same extent as any business gambles conducting any of their business. You will take a loss every now and again, bad product, warranty work etc but over a time period you will win. Providing you limit and control human errors.
Or if you don't have an edge and just "buy" yes you are gambling.

NQ futures and the other Index Futures exists for a few reasons. To hedge risk for businesses and other entities. But you can't just have all hedgers trading them it won't work like that. So you also need speculators to take the other side of the hedgers trade.
So when you "buy" NQ or trade it as a speculator you are doing so in an effort to profit from the event.

And yes there is no need to look at a cash indexes volume.

Ron

It is an axiomatic fact that while you meditate you are speaking with your own spirit. In that state of mind you put certain questions to your spirit and the spirit answers: the light breaks forth and the reality is revealed.
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
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