After persistent sell offs for the last few days the market took a bit of a breather today. Futures trading was slow, but surprisingly a solid 125,000 contracts exchanged hands. With nearly 200k the last two, more volatile days, it is clear that volumes are picking up a bit. With open interest still hovering around the 400,000 level, we are seeing days where nearly half of the open interest trades. Need anymore be said with regards to how much of this market is being day traded? I don't think it would be much of a stretch to say that the algorithms are doing a lot more of the trading then the people are. In such an environment it becomes very difficult to trade without keeping wide stops. Yesterday, I had the direction and size of direction called perfectly, and still lost money. Why? Because I kept stopping out only to watch the futures retrace to the levels I was buying them at, and then higher. As I have written about before, the algos are constantly searching for large stops to trigger. As such, in an algo heavy market the probability of getting stopped out is that much higher. Without strong conviction about the markets' direction, the risk reward makes short term human futures trading a pure loser's game.
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