Interpreting Volume in the Futures Market [Video]

Interpreting volume in the futures market differs from doing so for stocks. Futures contracts have an expiry date, while stocks do not. This means volume fluctuations and patterns can mean something different than with stock futures.

A futures contract has a defined life span; those with open positions must close them out or cash settle before the end date. Thus, leading up to that contract expiration date, volume naturally picks up as traders, hedgers, and speculators close out. Volume increases pre-expiry don’t necessarily mean a longer-term trend shift. By contrast, stocks have no defined expiration date so volume patterns aren’t necessarily influenced by regular life cycle endings that cause an automatic increase.

Interpreting volume with price action can help assess futures market sentiment, confirm trends, and identify potential reversals, making it a good tool for more informed trading strategies.

Volume in the futures market can be used to gauge market …