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How to predict if a market will be volatile?
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How to predict if a market will be volatile?

  #11 (permalink)
Market Wizard
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TickedOff View Post
What are some things to look out for that indicate a day will have some big moves? I perform way better in fast markets

Look at higher time frame and where we are in the overall cycle.

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  #12 (permalink)
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TickedOff View Post
What are some things to look out for that indicate a day will have some big moves? I perform way better in fast markets

While there have been some good suggestions so far, I honestly don't think you can.

You can look at the recent action and the current context pre-open, and it may have some follow-through, but it also may not.

I would try to respond to what the markets are doing at the time of trading them. Your reading of context can be valuable here, but knowing in advance what the day is going to be like is probably one of those things that you just are not going to have. Also, my experience is that trying to decide it in advance can be dangerous. You can get all set for one thing, and then have to deal with price not going along with your ideas.


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  #13 (permalink)
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You specifically ask for which day you'll see higher volatility, and I think at the 1-Day resolution the best indicator will be a good economic calendar:

-There will be higher probability of large one-day moves upon the announcement of key reports.

-From a lower resolution view like week to week, month to month, you'll notice some markets, like grains, have seasonal tendencies for higher volatility (Corn volatility usually spikes in July). Furthermore you can also make mean reversion observations, that is, "it's lower than normal right now, higher is likely to follow, just a matter of when"

-For a 1-hour resolution, I've seen the biggest moves within the first 30 minutes of normal market hours. I know this because I have volatility alerts set for /CL, /ES, /ZC, and /ZS and this is when they usually trigger. Even though futures are traded 23/6, I think the reason they often move at normal market open is because 1.) This is when a lot of professional traders and institutions start their work day in the US and 2.) People playing arbitrage opportunities against the markets that do open at 9:30 EST.

I'm assuming we're talking about historical volatility and not implied volatility.

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  #14 (permalink)
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The volatility often comes in cycles. So ATR and ADX can give you some idea of what kind of ranges you can expect to see.

My experience has been that a strategy that only makes money when things are moving or only makes money when we are range bound is bound to have problems for you long term. Otherwise you end up with really long drawdown periods that just mess with your head. It's better to work on finding strategies that work in all markets, and then when you get that outlier that you know is turning into a crazy day you step on the gas pedal.

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  #15 (permalink)
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Relative volume and 'pace of tape' indicators are good ways of quantifying activity, and might help you identify the type of conditions you're interested in. And as mentioned, the ATR.

You can also watch for specific chart patterns such as breakouts of coiling/contracting patterns and key S/R levels, as they often correlate with increased price movement. And if you're 'fundamentally' oriented, you could time with key data releases, which can bring about increased volatility (Or too much ;-) also might try 'working backwards' by identifying and avoiding conditions that aren't favorable to your trading, which could be easier to isolate. Hope this helps.

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  #16 (permalink)
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I have a basic follow through question are there specific months where you would expect volatility to be low? US summer holidays right? (Which is now?)

Understanding yourself is just as important as understanding markets.
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  #17 (permalink)
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TickedOff View Post
What are some things to look out for that indicate a day will have some big moves? I perform way better in fast markets

Generally, I would say that if the VIX chart is next to an important low they are big chances for it to come back and get higher.

Also, after long periods of low volatility, there are the greatest chances for a spike.

Also, if you want more volatility for your trades I strongly advise you to trade 30 minutes after the US open (US open starts at 3:30 PM PARIS TIME). Tuesday to Thursday are mostly the best days for liquidity and volatility.

EUREX markets such as FDXM are amazing for volatility if you like markets that move fast :-)

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  #18 (permalink)
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A late answer. FuturesTrader 71 is very cognizant of what you are talking about. He likes to pile into a very large trade and then take profits as it moves in his direction. So he needs big markets in order to place 50 or a 100 contracts easily. I am pretty sure he would tell you that you want to trade the days when other time frame traders are active. That would be other than day traders. He makes it clear in his morning videos. Day traders follow a pretty clear set of rules when it comes to support and resistance levels, trend lines and certain moving averages. He will comment that it was clear the day traders were running the show. He will also say when the longer term big guys are active. Because they don't care about our rules and they will keep going ignoring all the stuff we have on our charts because they really don't care. As in risk parity funds lightening up or Goldman's buyback desk making sure the price is where it needs to be to unlock a CEO bonus. Mutual funds facing a liquidity crisis. The list goes on and on and on.

So if you are looking for high volatility big moves you are really saying when are the large funds likely to be active and when are they all at the Hampton's.

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  #19 (permalink)
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TickedOff View Post
What are some things to look out for that indicate a day will have some big moves? I perform way better in fast markets

I listen to the markets with sound alerts for new high new low on all Index Futures, Interest Rate Futures, CL, Gold as well as buy/sell divergences, exhaustion and others.

I also use Price Squawk, from Graham, who is from your neck of the woods. This tool is a game changer for me and can't imagine being without it. You can set it up many diff. ways to have market events play sounds or just trades etc. Sometimes I like to turn on the squawk where it speaks the current price and if the bid is being hit or offer lifted etc etc. It helps me. Way too hard for me to convey all it can do here in this post.

NY ONLY TICK extreme readings sound alerts

With these sounds all going off ,or not, I can tell a ton about the "feel" of a day.


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  #20 (permalink)
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There always is a Bull Market somewhere. The trick is finding it. Stocks go up one day and down the next. Trends the the trick.

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