Predicting a stock’s daily trading volume from the market open



Given yesterday’s post showing the link between trading volume and stock valuation, it would seem appropriate to investigate the ways in which we can predict today’s volume. Its all well and good to know that high volume coincides with volatility and falling prices but how do we know we are going to be in a high volume period?

It would be nice if we could quickly identify which trading days are likely to be high volume in real-time. As such, we wanted to test how well the daily volume could be predicted using just the first minute’s trading volume after the 9:30am open.

The first chart plots the opening minute’s trading volume for SPY against the rest of the trading volume for the day (i.e. total daily volume minus first minute’s volume). As we can see there is a decently high correlation between the first minute’s volume and the rest of…

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