1. Beginner's Guide To E-Mini Futures Contracts: Introduction
  2. Beginner's Guide To E-Mini Futures Contracts: What Are The E-Minis?
  3. Beginner's Guide To E-Mini Futures Contracts: E-Mini Characteristics
  4. Beginner's Guide To E-Mini Futures Contracts: E-Mini Specifications
  5. Beginner's Guide to E-mini Futures Contracts: Popular E-mini Contracts
  6. Beginner's Guide To E-Mini Futures Contracts: Who Trades The E-Minis?
  7. Beginner's Guide To E-Mini Futures Contracts: Trading The E-Minis
  8. Beginner's Guide To E-Mini Futures Contracts: Other E-Mini Contracts
  9. Beginner's Guide To E-Mini Futures Contracts: Volume and Volatility
  10. Beginner's Guide To E-Mini Futures Contracts: Margins
  11. Beginner's Guide to E-Mini Futures Contracts: Rollover Dates and Expiration
  12. Beginner's Guide To E-Mini Futures Contracts: Brokers
  13. Beginner's Guide To E-Mini Futures Contracts: Tax Advantages

What is Volume?

Volume refers to the number of shares or contracts that are traded during a specified period of time. The average daily volume is the number of shares or contracts that are traded – on average – during a particular time period. Many of the e-mini futures contracts trade under high volume; the ES leads the pack with over 1.4 million contracts traded on average per day. To traders, strong volume means that there is good liquidity, ensuring that orders will be filled, filled with minimal slippage and filled without substantially affecting price.

What is Volatility?

Volatility, on the other hand, measures the amount and speed at which price moves up and down. When a trading instrument experiences volatility, it provides opportunities for investors and traders to profit from the change in price – whether prices are moving up or down. You can’t make a profit if prices don’t change.

A quick look at the relative size of the price bars provides an indication of the degree of volatility. Smaller price bars represent decreased volatility, whereas larger bars indicate increased volatility. To accurately measure volatility, you can use technical indicators such as Average True RangeBollinger Bands and the Chaikin Volatility Indicator. Knowing how much price is expected to move throughout a trading session is important for setting reasonable profit targets and protective stop loss levels. For example, if the average daily price fluctuation in a contract were five points, it would be unrealistic to set a daily profit target of 20 points. 

Volume and volatility are important characteristics of the e-minis since these two factors help create profitable trading opportunities. Because the e-mini stock index futures contracts trade nearly round-the-clock on all-electronic exchanges, these contracts are attractive to traders around the world. There are times of the day, however, when there’s better volume and volatility. The following chart shows a five-minute chart of the ES contract. Note that the times when both volume and volatility are highest coincide with the regular U.S. stock market trading session.

 

Volume and volatility pick up during regular U.S. market hours. Image created with TradeStation.


Beginner's Guide To E-Mini Futures Contracts: Margins
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