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If markets are ran mainly by computers why does overnight trading have such low volatility? I understand you need a large amount of capital to be able to trade overnight but I'd assume instituions have this money.
Hi Ethan,
The algos don't run 100% autonomously. They often need people to constantly watch the strategies and adjust them and those people need to sleep. Also various real live businesses shut down during various 24hr periods until the next exchange around the world opens so it's just natural that markets quiet down when there's are no business activity to react to.
Also a lot of volume that flows through the markets isn't based on 5 minute price action charts. Institutions make transactions based on government regulations, wealthy clients who wake up and want to execute massive volumes send requests after breakfast, hedge funds that trade from news only don't even look at charts. And all those people sleep too.
Hope this helps,
CH
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BPA Telegram Group
It's the same reason why volume is thin around public holidays. People who watch the algos are off to the Bahamas, leaving the algos to trade a fraction of their normal volume.
