There's a flaw with this concept...as soon as volatility is high...it takes a few days or more for it to
return back to its mean. Also, if the cause of the high volatility is still present and the market is still discussing it as the reason for the high volatility...it may take a little longer for the volatility to
return back to its mean.
Simply, if you know its high volatility on one day...you will know beforehand it will be high volatility the next trading day although it could be trying to revert or go higher.
For example, pretend its high volatility on Weds July 31st, Thurs August 1st and Fri August 2nd. Then over the weekend reasons for the volatility is still being hyped & discussed by those that move the markets...its an issue in many different key markets and the financial networks & other professionals can't stop talking / reacting to it in real time.
Simply, volatility is still an issue.
Further, volatility is not going to suddenly disappear on Monday August 5th and Tuesday August 6th of the following week. This is exactly what happen the prior week to his losses on Monday and Tuesday (the big one) because volatility was still high via what had occurred the
prior week (ground zero). I think hilmy83 refer to the climax on Monday and Tuesday as consecutive 1000 tick days or something like that.
Therefore, even if volatility dramatically declined as it tries to
revert back to its mean...its still high and not good trading conditions for most while its reverting for those that are using a trade method sensitive to movements in the volatility...that's what I strongly suspect what happen (the reasons for the consecutive losing trading days) to hilmy83 on Monday August 5th and Tuesday August 6th although Friday August 2nd was the "warning day" when he had 933.80$ in profits.
Therefore, if your
statistics show your trade method performs poorly in high volatility trading conditions (which is why I asked him the question about when he lost 1/2 his profits in one trading day after he mentioned such earlier in this thread...he should know what days these big losses are occurring on)...
You can then know with high probability the next trading will still be high volatility market conditions even if volatility starts to revert (decline) back to its mean. In fact,
statistically, volatility has
never been
high one trading day and then
low the next trading day...it takes a mimimum of a few trading days for it to revert.
Simply, high volatility will either
1) Go higher
2) Begin to revert
Its during that
reversion period when volatility is still dangerous for traders that use a trading plan thats sensitive to volatility in a negative way. In contrast, others that have a trade method that performs well in high volatility...they will continue trading well for a few days at the minimum while volatility begins to revert until it returns back to its mean.
This is just one way out of many how professional traders adjust their position size management to volatility. The above is mute if a trader doesn't know the historical stats of his/her profits & losses versus volatility.
Friday August 2nd - Volatility spiked higher and its a breakout above its weeks range. Its a week of FOMC (July 31st), Trump (tweet fiasco), 10% more Tariffs threats, China, Hedge Funds concentrated together in certain stocks and a few other key events with Europe & Asia.
Monday August 5th - Volatility was high and rising during the
Asia,
European and
U.S. trading sesssion.
Tuesday August 6th - Volatility will either
1) Go higher
2) Begin to revert...
Three trading sessions on Monday August 5th with high volatility as a
global event. Thus, it's
not a coincidence and it takes a while for the markets to calm down from a global reaction to whatever it was that caused the high volatility. I'm just
shocked that volatility is not much higher...2x to 3x higher.
Since President Clinton years...the market has gotten better at shaking off sudden volatility and
reverting it back to its mean within a few trading days of the climax. As if its lying on its back and smoking a joint after it has had its way with us.
The key here is that we can only see what hilmy83 shows us in the live stream or recordings of the live stream to know how his position size management impacted his trading when volatility went from normal to high and then reverting back to normal.
Stuff like the above kills traders and can cause many to disappear for awhile or permanently that took unusual risks in their position size management or the markets they're trading. It can be very
spooky to many if they do not have control of their emotions.
On the flip side, markets since Wednesday July 31st is what attracts new traders to the markets to continue the wheel to go around and around.
P.S. A good trader will adjust and/or take a closer look at their statistics going forward and historically.
wrbtrader
