Whatever financial instrument that I trade, liquidity plays a major factor because it affects the bid/ask spread. Never jump into a trade without first checking vital criteria such as volume to ensure that you’ll get filled at an optimal entry and exit price.
So what I have pulled up here is I just want to gain some perspective and some context on what does a lot of volumes look like? What is light volume look like?
So right here I have today’s a snapshot of some the most active futures contracts and I have highlighted the volume so as you can see at the top of the list you have the “ES”
It’s the “S&P 500 E-mini” is in the March Contract and so as of today January 4 if the current volume is about 1.1 million. So it’s 1,129,430. So that’s the trading volume for today.
And then under that, you have the “10-Year T-Note” in the March Contract, and that their volume is right upright under that little less than 1.1 million as well.
So it’s heavily traded and because it’s heavily traded you have fairly tight spreads and we’ll go over that as well and as you can see it down you have a big drop.
The third one is the “5-year T-Note, March Contract, and that daily volume is 679,506 and then on down “Crude Oil” 631,995 down to the “Eurodollar” March Contract 409,000 all the way down.
And the bottom of this particular list on the page if “Soybeans” and “Copper” in the March Contract around a little over 100,000 contracts traded for the day.
Alright. so just keep those numbers in mind. Now I want to show you what Bitcoin features looks like right now.
So these are the currencies page again as of today Thursday, January 4th. At the very top, you see the euro the “Euro” March Contract’s volume is about a little over 202,000 contracts traded.
Under that is the “Yen” March Contract at 114,000 contracts traded and if you keep going all the way down.
Now we find some Bitcoin, so you’ve got the Bitcoin in January futures contract clones “CME” at 756 contracts traded and then you have the “Cboe” in February contract for Bitcoin at 276 contracts traded.
So the volume is very light it’s very light in the world of currencies. And just overall futures market it’s very light volume and it is new.
So right here is the continuous contract pulled up so it’s like you have the “@” symbol at BTC and that’s a continuous Bitcoin futures contract and I have it on a daily chart and that means that each candlestick you see represents 1 day.
Now if you go to the top the upper left-hand corner of your window here. It’s really small and it’s kind of hard to see these numbers, so what I’m gonna do is go to “Format” and go down to “Window”, format my window, this is called your “Status-Line” and so here’s my status line under the “Font” tab. I’m just going to keep the font style, I’m gonna make it bold and I’m gonna pull it up to about size 14 except that default you can do it however you want. I’m gonna hit OK
And it makes a little bit easier to see. So up here, on your status line, you have your symbol, you have the timeframe that the chart is pulled up under it from the CME.
Again, up in the upper left-hand corner “BTCF18”, a different contracts months has a letter, and I honestly forget the letters all the time I have to keep like looking up “What’s the letter for this month for different commodities and stuff”.
So bad memory, I’ll get it one day so the January one is “F” and 18 represents 2018 this is a daily chart.
And I want you to notice up here “B=14,550”, “A=15,095” that’s the bid-ask now look at the spread between the bid-ask, the size, the number of ticks, amount of dollars between 14,550, that’s just like a buyer’s work, that’s the bid.
Someone’s willing to buy at that price and then but people who are willing to sell at this price, that’s the asking price 15,095. It’s a big difference.
Okay, cuz look at the volume “V=760”, three late volume and if I keep going further down, there’s the February, contract, it’s a daily chart.
Look at your bid-ask again, 11,920 on the bid and 15,115 on the ask, volume “V=47”.
Let’s go to March if March gets any better the March contract as of today is the business 14,790 and the ask 16,415, the volume is 55 contracts.
So what this looks like when something is very liquid and has a much higher volume I’m gonna go to the “@ES” , the S&P 500 minutes the continuous contract.
Look up here, look it, I hear that a lot. Look at it! So I’ve been bid 2,724.75 cents could be asked 2,725. That’s like one tick it’s like a quarter look how tight that is one move away get the volume is 1,139,096.
And it’s kind of like if you go to a farmers market or you know a place where there’s a lot of vendors and you have vendors trying to sell.
Cellphones, everyone’s trying to sell cell phones at these tables and they’re all the same cell phone. They’re all competing against each other so if you’re competing against each other.
What typically happens to the price? The price from the vendor to the vendor gets smaller. It contracts and it’s like you’re on sale for 99,95 and you want to sell it to me for 99,93.
Oh look down here, this is to finish deeper 99,90. Okay, you win my business. So it’s a mean it’s very competitive whereas though if you go into a market farmers market and there’s like two vendors. They can kind of charge whatever they want you only have two options.
All right and we look to options and they can spread kind of widens out a lot same way like a free market, open market the spread gets wider. It’s not as many people there it’s not as many buyers and sellers and it the crowd thins out.
So if volume makes a big difference, I mean think about it if you bought, let’s see if you bought let’s go to January Bitcoin contract. Okay, so the spread is so big it’s 450, it’s almost $550.
It’s like if you go in and out immediately you could lose a lot of money, it goes against you. So just keep that in mind, volume very important.
So if you want to trade the futures contracts right now, pay attention to your bid-ask spread. It’s not tight right now it’s not tight at all, you need the price to the underlying to really move in your favor because if it moves against you whatever position you get in long or short you have to overcome a spread as well as the underlying moving.
Alright, so, I’m checking out I just wanted you guys to take notice of that and get the volume context for Bitcoin futures in comparison to other things to have way more liquid.
I’ll talk to you later. JB trader’s out. Enjoy your day