How to predict if a market will be volatile? | Traders Hideout


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How to predict if a market will be volatile?

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charlotte nc
 
Trading Experience: Master
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Very high volatility periods tend to last for days or weeks and only change back to medium or low volatility on news releases that normalize the markets again. I remember when February of this year hit an extremely high volatility period we were in it for several weeks.

If the goal is to try to trade during high volatility periods only, then I recommend the following.

1. Quantify first what characteristics define high volatility, medium volatility, low volatility etc. This various per instrument, but as others have said the big easy to read signs are the thickness of the DOM and the speed of the tape.

2. Find a few days historically in the last year when the market changed from medium to high volatility.... Once it moved into high volatility how long did it stay there and what broke it finally. In the US what I have observed at least this year, is that news comes out that freaks everyone out and the market goes crazy for a few days or a week or two and unless new news to the contrary comes out.... the high volatility continues. There has been a lot more panic and fear this year than in the past. It used to be just an econ news release drove the volatility high for a few days and then things would calm down.

3. Once you can see the patterns historically of: News > High Volatility > Some event to slow it back down: In in connection with this you can define the average high volatility period once we move into it... Then you can find your proverbial sweet spot.


You will likely have to correlate news and historical data to paint this picture completely but once you have all the pieces I think you could predict this fairly easily for the future.


Best of Luck!

Ian

In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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