If there’s one thing traders love, it’s volatility. Large price swings create opportunities for nimble traders to time the market by buying low and selling high.
That’s something that was nearly impossible to do in last year’s environment of steady gains. Investors who sat tight with a buy-and-hold strategy were rewarded handsomely in 2017, while traders counting on volatility to outperform were left frustrated. So far in 2018, the situation has been flipped on its head.
This year, investors are the ones frustrated by a market that’s swung around a lot, but ultimately hasn’t gone anywhere despite strong earnings and economic fundamentals. On the other hand, traders are gleefully trading in and out of the market as stocks whipsaw violently.
The increased trading activity is reflected in the market’s volume levels. Volume—a measure of how many shares trade hands on a given day—is averaging 7.3 billion shares per day across the major U.S. exchanges, year-to-date. That compares with 6.5 billion for all of 2017.
Much of that volume is showing up in ETFs. The most actively traded securities on U.S. exchanges are usually exchange-traded funds, with tens of millions of shares exchanging hands each day in some popular names.