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Predicting daily volatility
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Predicting daily volatility

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Predicting daily volatility

Is there a way to predict a higher or lower volatility day?

With it I could increase or decrease my target price accordingly.

I trade CL and 6E. Today (6/29/12), from the news, a higher volitility day for CL could have been anticipated. I don't think pivots work.

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It's a good idea to keep an eye on $Vix futures and the spread between current, front month and future

CFE | Quotes CFE - CBOE Stock Exchange

also when you have tight ranges and they break out of that range http://www.thepatternsite.com/nr7.html

so if you have several days in a tight range you should probably be looking for a wider range /volitility

after today we would be looking for less volitility and range unless people have gone bonkers


add: but with summer and less participants it's a lot easier to throw the markets around so caution is best bet ...

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Last edited by GridKing; June 29th, 2012 at 07:39 PM.
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VIX and More: Put to Call Ratios and Volatility Predictions

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mannya View Post
Is there a way to predict a higher or lower volatility day?

With it I could increase or decrease my target price accordingly.

I trade CL and 6E. Today (6/29/12), from the news, a higher volitility day for CL could have been anticipated. I don't think pivots work.

I think this thread has some good info, if I recall

https://futures.io/elite-circle/5242-intraday-seasonality-volatility-when-trade-when-not-trade.html

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mannya View Post
Is there a way to predict a higher or lower volatility day?

With it I could increase or decrease my target price accordingly.

I trade CL and 6E. Today (6/29/12), from the news, a higher volitility day for CL could have been anticipated. I don't think pivots work.


@mannya: The higher volatility is news driven. On Thursday there was the European summit. Now what typically happens is that prior to a big news release volatility drops, and you should then be prepared that volatility increases after the news has been released.

If you look at the chart as per Thursday morning at the beginning of the European summit, you will note that

-> the average daily range of the prior 2 days was 77 pips
-> the average daily range of the prior 10 days was 111 pips

So there was a contraction prior to the European summit. The 3 consecutive narrow pivot ranges also predicted a surge in volatility.

The first step of rising volatility came with the summit, when volatility was back to normal and the range target was hit. Thursday's range was 118 pips and between the average 10-day range and the average 20-day range.


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The large move came, when the summit was finished and the news were released around 10:51 PM EST on Thursday. Let us have a look at the news, I will simply copy them from Marketwatch:

released around 10:55 PM EST:

EU to present single supervisory mechanism propsal
EU: will have direct recap of banks possibility
Euro breaks above $1.25 after EU summit remarks


released after the fact on Thursday, 11:06 PM EST:

Euro soars on European Union bank-supervisor plan

LOS ANGELES (MarketWatch) -- The euro rocketed higher early Friday after European Union officials said they are aiming to establish a single financial supervisor for the currency bloc. The euro EURUSD jumped almost 2 U.S. cents to $1.2605 from $1.2429 in late North American trade Thursday.


So it is an opera. Everybody knew there was a performance on Thursday, every body waited for the final outcome. When the news was released the market reacted. As there was little movement during the two prior days, the traders that had been waiting now joined into the move, and obviously this resulted in a surge in volatility.

See chart below:

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