No pun intended as we ironically go into Memorial day weekend
, but when the market observes a holiday we normally get very light volume the day before. Its laregely due to the fact that active traders make up 70 80 percent of daily trading volume. This in turn adds liquidity and order flow to keep markets stable and orderly. Some would argue that momentum day traders ruin the opportunity for money managers and individual longer term investors of getting good prices. But I see it differently.
If it werent for active traders, then anyone that wished to buy a stock would experience large illiquid wider spreads in our electronic auction markets. There was a time when we traded in fractions but today we trade in cent spreads in most stocks. We were able to transition to tighter spreads because of the revolution and fast paced growth in electronic trading. This in turn gave everyone with a home computer access to buy or sell any given stock. With so many people able to buy a stock at a click of a button everyone wanted a peice of the market. So you can imagine what happens when us active traders are given holidays. We tend to take them a day early resulting in dryed up volume and that believe it or not discourages institutional trading.
This results in a pyschological snowball effect that affects trading volume. But lets not forget what happens when one extreme happens. You naturally get the opposite effect and thats what happens after a long weekend. Volume in the averages often doubles its daily average and we experience twice the size of our normal price volatility. Whats grand about such times is that these holidays allow news flow to build up over the markets closing days. This creates 3 arguements to not miss trading the day after a long weekend or random 1 day holidays during the week.
Star Alliance Capital Partners would like you to invite you to our free day trading webinar. At this free webinar you will learn the basics of trading and we will show you how a professional trader can make money from stock market movements. For more information and attend to our Free On line Webinar please visit http://www.dimensiontrading.com/staralliance/