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Volume by session, and holidays

Lesson 15 · about 8 min

If you drew the volume of ES across a 23-hour day, you would get a shape that is nearly flat for twelve hours, bumps up when Europe opens, spikes at the US cash open, sags at lunch, and spikes again into the close. That shape is stable from day to day and it should decide when you trade. Holidays bend the shape in ways that catch people out.

The daily volume profile

Illustrative distribution of a normal day's ES volume by period. The exact percentages move around; the ranking does not.

Period (ET) Hours Share of daily volume Volume per hour (relative)
6:00 pm to 2:00 am 8 6% to 10% ~1
2:00 am to 8:30 am 6.5 10% to 15% ~2
8:30 am to 9:30 am 1 5% to 8% ~6
9:30 am to 11:30 am 2 25% to 35% ~15
11:30 am to 2:30 pm 3 15% to 20% ~6
2:30 pm to 4:00 pm 1.5 20% to 25% ~15
4:00 pm to 5:00 pm 1 2% to 4% ~3

The last column is the useful one. The first two hours of RTH and the last ninety minutes each carry around fifteen times the per-hour volume of the Asian session. A five-minute bar at 10:00 am contains more trading than an hour-long bar at midnight. Comparing a bar's volume to a moving average of volume is meaningless unless the average is time-of-day adjusted, which is why "high volume" alerts at 3:00 am mislead.

Micros versus full-size across the day

Micro contracts follow the same shape but are thinner at every hour and proportionally thinner overnight. During RTH the MES book is deep enough that a retail-sized order never moves it; overnight, a 20-lot MES market order can walk several ticks. If you trade micros overnight, use limit orders for entries and accept that the stop will be a market order with real slippage.

Economic releases

Scheduled US data lands at fixed times, mostly 8:30 am and 10:00 am ET, with the Federal Reserve's decisions at 2:00 pm ET on FOMC days. Volume in the seconds after a release exceeds anything else in the day, and the book briefly empties before it. Treasury futures and currencies react most; the index contracts follow.

The most-watched releases are the monthly employment report (first Friday, 8:30 am), CPI (8:30 am, mid-month), and FOMC (2:00 pm, eight times a year). A plan that does not know the calendar will eventually have a stop filled 15 ticks through its level at 8:30:01. Every trading platform and most brokers publish the calendar; a weekly look at it is the minimum.

Key idea: Volume per hour varies by a factor of fifteen across the day. Trade where the volume is, normalize volume by time of day, and know the release calendar so a scheduled event never surprises you.

Holidays

The exchange holiday calendar has three kinds of day, and each does something different to the schedule:

Kind Example What happens
Full closure Christmas Day, New Year's Day Globex closed; the next open is the evening of the holiday or later
Early close Day after Thanksgiving, Christmas Eve Cash markets close at 1:00 pm ET; futures halt shortly after and reopen at 6:00 pm
Cash closed, futures open Most bank holidays (e.g. Presidents' Day, Memorial Day, Labor Day) Stock market closed, but index futures trade a shortened session with very little volume

The third kind is the trap. On a day when the stock market is closed, ES still trades, but with no cash market to arbitrage against, the book is a fraction of its normal depth and the range can be tiny for hours and then jump on a single headline. Treating a holiday session like a normal RTH session, with normal size, is a way to get a bad fill in a market that is not really open.

Good Friday is its own special case: the stock market is closed, and the exchange usually closes the index futures too, but the employment report has occasionally fallen on that date, producing a brief reopened session at 8:30 am for the release. Exchanges also close early on some days that are not holidays. Check the calendar every month.

The days around holidays are also affected. The Wednesday before Thanksgiving, the week between Christmas and New Year, and the Friday before a three-day weekend all run at a fraction of normal volume during what looks like a normal RTH. The volume profile is the tell: if 10:00 am volume looks like 1:00 pm volume, treat the session as thin.

What thin days mean for your plan

  • Reduce size or do not trade. Thin markets produce more slippage and less reliable setups.
  • Widen stops in ticks if you do trade, and shrink contracts to keep the dollar risk the same.
  • Do not hold into an early close expecting the usual close-of-day liquidity.
  • Remember the margin cut-off moves with the early close.

Try it: Pull the exchange's holiday calendar for the next three months and mark every full closure, early close and cash-closed-futures-open day in your own calendar. Then look at last year's volume on one of the cash-closed days and compare it to a normal day.

Recap

  • ES volume per hour varies about fifteen-fold across the day; the first two hours and last ninety minutes of RTH dominate.
  • Normalize volume by time of day; raw volume comparisons across sessions mislead.
  • Scheduled releases at 8:30 am, 10:00 am and 2:00 pm ET produce the fastest markets of the day; know the calendar.
  • Holidays come in three kinds; cash-closed-but-futures-open days are thin and dangerous at normal size.
  • Reduce size on thin days and remember the margin cut-off moves with early closes.

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.
A volume profile beside a price chartA price line on the left and, on the right, horizontal bars showing how much volume traded at each price; the longest bar marks the point of control and a shaded band marks the value area.52.051.050.049.0timePRICE OVER TIMEVOLUME AT EACH PRICEVALUE AREAwhere most ofthe volume tradedPOCthe single pricewith the mostvolumeLonger bars mean more shares changed hands at that price.
Volume profile, point of control and value area. Turn the chart on its side and count how much traded at each price instead of at each moment. The longest bar is the point of control, and the shaded band around it is the value area where most of the session's business was done.
Margin and leverageA small deposit controlling a much larger position, and the point at which losses trigger a margin call.Position you controlnotional value $100,000your margin deposit: $5,000$100,000 / $5,000 = 20:1 leverageYour deposit absorbs every dollar of loss$5,000$2,500$0Equity leftMARGIN CALLequity has fallen to $2,5000%1%2%2.5%3%4%5%How far the price moves against you
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.