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ES intraday volatility recently
Started: by skiguy Views / Replies:946 / 20
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ES intraday volatility recently

  #11 (permalink)
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choke35 View Post
If you regularly take a look at the VIX futures which measure the implicit volatility of S&P 500 options,
this will not happen to you again. As you can see, the VIX index (composite of the VIX futures) has
just dropped to long-term lows. OTF traders stay away at these levels since there is absolutely no
reason for trades unless unexpected news hit the market. For scalpers it means that the average
daily noise (ADN) drops to levels with only a very small margin for correcting mistakes. (Noise traders
like scalpers implicitly rely on the ADN because it represents the chances of realizing a noise trade
of magnitude x; ADN is ~3p at the moment for the ES).

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Hi Choke,

Is it because of the price of vix around 12 or the small size (range) of the daily bars of vix, that we are seeing the otf traders staying away?

Thank you

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  #12 (permalink)
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Sure, but I still don't see the logics behind that:


skiguy View Post
Taking the close of Vix each day and put that rounded value against each of the next trading days for the period 20th July to 16th Aug.

What kind of predictive value did you expect from your calculation?
(From a purely methodological point of view it already starts with the rookie fault
of looking at absolute values instead of returns ...)

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  #13 (permalink)
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Drd13 View Post
Hi Choke,

Is it because of the price of vix around 12 or the small size (range) of the daily bars of vix, that we are seeing the otf traders staying away?

Thank you

In contrast to noise traders OTF traders regularly don't trade without reason.
Minor/mostly irrelevant OTF reasons are technical, e.g. are pivotal points of
supply and demand which can be spotted in the charts. Most of the time the
minor reasons only get relevant when herd instinct leads to sharp rallies or drops
and thereby creates a news of its own.

Stronger OTF reasons normally stem from fundamental news which influence
valuation expectations of large portfolios, e.g. NFPs, FED, ECB. For individual
stocks you can add earnings news to that list.

The less fundamental news you have (i.e. the higher the level of pure noise)
the more market volatility normally shrinks and normally esp OTF volume with it.
So as long as the VIX is that low it's one confirmation for OTF that nothing
is going on and thus no reason for trades.

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  #14 (permalink)
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choke35 View Post
In contrast to noise traders OTF traders regularly don't trade without reason.
Minor/mostly irrelevant OTF reasons are technical, e.g. are pivotal points of
supply and demand which can be spotted in the charts. Most of the time the
minor reasons only get relevant when herd instinct leads to sharp rallies or drops
and thereby creates a news of its own.

Stronger OTF reasons normally stem from fundamental news which influence
valuation expectations of large portfolios, e.g. NFPs, FED, ECB. For individual
stocks you can add earnings news to that list.

The less fundamental news you have (i.e. the higher the level of pure noise)
the more market volatility normally shrinks and normally esp OTF volume with it.
So as long as the VIX is that low it's one confirmation for OTF that nothing
is going on and thus no reason for trades.

Thank you. That was really clear. I appreciate the extended explanation!!

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  #15 (permalink)
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choke35 View Post
Sure, but I still don't see the logics behind that:
What kind of predictive value did you expect from your calculation?
(From a purely methodological point of view it already starts with the rookie fault
of looking at absolute values instead of returns ...)

It is simply a way of tracking Vix (plotting it one day fwd is neither here nor there).

We seem to be talking at cross purposes now.

You have stated:

"As you can see, the VIX index (composite of the VIX futures) has
just dropped to long-term lows. OTF traders stay away at these levels since there is absolutely no
reason for trades
".


Last edited by skiguy; August 20th, 2016 at 02:59 AM.
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  #16 (permalink)
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It may well be that the results I am getting are random and cannot be explained by Vix or ADN.

During the whole period I have detailed stats for, the Vix has been low (for all but 1 day it has been max of 14 and for all the remaining days bar one it was 13 or 12, leaving 1 day at 11).

Prior to Aug 8 the win-break even rate was 68%. In the period since then it has been 54%. Also getting less trades per day.


Last edited by skiguy; August 20th, 2016 at 01:51 AM.
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  #17 (permalink)
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skiguy View Post
You have stated:

"As you can see, the VIX index (composite of the VIX futures) has
just dropped to long-term lows. OTF traders stay away at these levels since there is absolutely no
reason for trades
".


skiguy View Post
It may well be that the results I am getting are random and cannot be explained by Vix or ADN.

During the whole period I have detailed stats for, the Vix has been low (for all but 1 day it has been max of 14 and for all the remaining days bar one it was 13 or 12, leaving 1 day at 11).

Prior to Aug 8 the win-break even rate was 68%. In the period since then it has been 54%. Also getting less trades per day.

Here we are: Your personal stats exactly that meet the expectation behind the initial answer.
With a twist: It's not simply "being low" - who knows if it can't go lower? It's also tendency /
trend (i.e. positive or negative returns) that counts.
  • OTF traders normally will not trade under such VIX conditions without any important and/or surprising news
    which trigger a revaluation of portfolios.
  • And as you proved for your own strategy, the chances stemming from noise are also substantially reduced -
    surely in their magnitude and often also in their frequency.

So, coming back to your first post: Yes, there were indications. Falling VIX / shrinking ADNs both flashed warnings.

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  #18 (permalink)
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choke35 View Post
Here we are: Your personal stats exactly that meet the expectation behind the initial answer.
With a twist: It's not simply "being low" - who knows if it can't go lower? It's also tendency /
trend (i.e. positive or negative returns) that counts.
  • OTF traders normally will not trade under such VIX conditions without any important and/or surprising news
    which trigger a revaluation of portfolios.
  • And as you proved for your own strategy, the chances stemming from noise are also substantially reduced -
    surely in their magnitude and often also in their frequency.

So, coming back to your first post: Yes, there were indications. Falling VIX / shrinking ADNs both flashed warnings.

VIX Comment

Since 13th July forward all Vix closes have been 13 or less (rounded to whole numbers) except for 1 day.

With respect to my strategy there is no forward warning for me if I was being impartial. With the benefit of hindsight could I have magically foreseen results would fall off on 8th Aug fwd? For me the answer is NO.

It's like beauty - it is the eyes of the beholder.

Like all these things, any confirmation tool / filter is Catch 22. if one uses say VIX (as an example) I would have missed out on the trades that were part of the 68% breakeven/winrate.

Re: ADN I need to do more stats on.

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  #19 (permalink)
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I saved this blog post the other week as I thought it was good. I just went back and read it.

https://www.investiquant.com/news/ensemble-forecasting-predictive-analytics-work...-historical-norms-part-2

Relating it to my situation and the stats I keep I would see that on 8th Aug was low number of trades and very low win rate. Keep trading as its only 1 day.

Aug 9 - low no of trades but good win rate. Keep trading as its only day 2. But now seeing results I have not seen before - hum

Aug 10 - good no of trades but only 50% win rate. Maybe time to observe the strategy and maintain detailed stats.

I start to think >> Time to question why or is it just the sequence of winners and losers which we have no control over.

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  #20 (permalink)
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skiguy View Post

I have a robust rule based setup for trading the ES based on 1 min charts.

Could it be that the Olympics are on?

If you have to ask, you almost by definition do not have a "robust system."

I would study automated system design more and try and understand all that goes into designing, testing, and validating automated trading systems.

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