Index volatility is coming down

TraderD · Mar 20, 2004

If you take daily chart for NQ, and divide price by ATR(14), you will note that the ratio is coming down relative to 2000-2002. Basically, in percentage terms, NQ "moves" less now.

This has immediate consequences on some of my systems - profitability goes down since moves (in percentage terms!) are smaller.

Would be nice to have that volatility back.

ig0r · Mar 20, 2004

Quote from TraderD:

Hope this does not continue.

stop hoping and cut your losses

TraderD · Mar 20, 2004

Quote from ig0r:

stop hoping and cut your losses

there is no losses, my post mentiones "lower profitability"....
i know hope is a "bad" word in trading dictionary, let's see if I can alter original post..

ig0r · Mar 20, 2004

Quote from TraderD:

there is no losses, my post mentiones "lower profitability"....
i know hope is a "bad" word in trading dictionary, let's see if I can alter original post..

losses does not imply monetary losses, my point was to deal with it, change with the market and don't be left behind

Vienna · Mar 20, 2004

Quote from TraderD:

If you take daily chart for NQ, and divide price by ATR(14), you will note that the ratio is coming down relative to 2000-2002. Basically, in percentage terms, NQ "moves" less now.

This has immediate consequences on some of my systems - profitability goes down since moves (in percentage terms!) are smaller.

Would be nice to have that volatility back.

"Low volatility begets high volatility and vice versa"- John Bollinger

TraderD · Mar 20, 2004

Quote from Vienna:

"Low volatility begets high volatility and vice versa"- John Bollinger

Amen to that. The question is how low is low. What if NQ settles into some boring range for few years until new money comes into equities?

PuffyGums · Mar 20, 2004

Quote from TraderD:

What if NQ settles into some boring range for few years until new money comes into equities?

Then everyone will be trading gold, beans and wheat again like they were in the 70's.

bdixon619 · Mar 20, 2004

Quote from PuffyGums:

Then everyone will be trading gold, beans and wheat again like they were in the 70's.

Who wants beans @ $12?

GATrader · Mar 20, 2004

Trader's want beans at $12 or even $16 so they can short it. Look at sugar, 200k in open interest but only 10 tic ranges since no one wants to short sugar at 6.5 cents. Once it rallyes to 8-12 cents a lot more intraday moves since shorts are more interested-more push/pull action, more disagreement in value.

canadian_dude · Mar 22, 2004

Quote from TraderD:

If you take daily chart for NQ, and divide price by ATR(14), you will note that the ratio is coming down relative to 2000-2002. Basically, in percentage terms, NQ "moves" less now.

This has immediate consequences on some of my systems -

I posted on this exact subject a few months ago, and at the time pointed out the market no longer "gaps open". Whereas the NQ used to open several percent above or below where it closed the day before, it no longer does that, normally opening in almost exactly the same spot it closed the night before.

In my opinion, the volatility we saw in NQ from 1998 through 2002 will never return, that was a once in a lifetime thing. Yes, there will be times when it is more volatile again for a week, or a month, but I don't think we will see 5 years of extreme volatility again.

That was a bubble that inflated and deflated, and that's not going to happen again anytime soon. There will be more bubbles that burst, but it will be something different next time. (maybe even real estate ?? nothing goes up forever ? )