volatility thread
- Thread starter elovemer
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The best way to pinpoint volatility spikes, increasing volatility or strong directional price movements is to first know what causes them.
* http://fidweek.econoday.com/
* http://www.forexfactory.com/calendar.php
* http://www.federalreserve.gov/whatsnext.htm
* http://www.ecb.int/home/html/index.en.html
* http://www.cboe.com/AboutCBOE/xcal2010.pdf
* Real-time news feed to catch those "breaking news" involving global economics that freaks out (bad or good) the markets.
* Intraday Tendencies and Market Seasonal Tendencies (e.g. Mon, Tues or Weds have the best volatility spikes, increasing volatility or strong directional price movements in a Quadruple Witching Week - intraday tendency).
Simply, the above time schedule will give you a heads up when volatility spikes, increasing volatility or strong directional price movements is most likely to occur especially if you're trading futures or forex currencies.
As for stocks, it's a lot more trickier or difficult because of fundamental news or corporate news...main reason why I don't trade stocks. Regardless, the key is not to try to predict a direction. Instead, your trade signals that are independent of the above should be used as confirmation into where you think the price direction will go when volatility spikes or when volatility begins increasing.
By the way, increasing volatility or declining volatility doesn't imply the VIX or similar like. It implies contraction / expansion analysis and some aspects of supply / demand analysis. Only use I've found via the VIX is that it's extremely useful to tell me when markets are in a low volatility trading range. That's the price action I don't want to be trading within because losses increases and profit targets aren't reach. However, the few times I can't help myself and do trade that crap...I do lower my position size to better manage the increased risk.
For next week...check out the FED Chairman Ben Bernanke speech schedule at the above links. You will see (not maybe) volatility spike, increasing volatility or a strong directional price movement at/near those schedule times. Now just sit back and wait to see if you get any trade signals when such occurs.
Mark
I've pinpointed when there will be a volatility spike, increasing volatility or a strong directional price movement way in advance.
For next week...check out the FED Chairman Ben Bernanke speech schedule at the above links. You will see (not maybe) volatility spike, increasing volatility or a strong directional price movement at/near those schedule times.
To be more specific...
* Feb 22nd Monday at/near 11am est
* Feb 24th Weds at/near 10am est
* Feb 25th Thurs at/near 9am est
Of course there's others that has nothing to do with Bernanke (e.g. Feb 24th Weds EIA Petroleum Status Report @ 1030am est). Regardless, I'll post a follow up chart soon after the change in volatility for each of the mention volatility changing events regardless of the price direction. Another way to look at it...I just gave you my specific signals way in advance to tell you when such will occur along with the "why such ocurred".
Once again, charts will be posted to show the change in volatility.
Mark
if you want to track volatility effects, couldn't you just tracks the volatility of pairs of uncorrelated asset classes? Say bonds/Equities/FX, track the divergence of historical volatility versus IV... and then determine if there is new information in the pairs.... i.e Bonds increasing Vol.. with Equities Less Vol, FX increasing etc...
Then you would have a reason to be long volatility...
You could just create a binary event say bond vol is up 1 deviation from normal, signal value goes to 1, etc, then equity vol goes down signal is 0 or -1...
Sum them all up and make some kind of quant indicator.
Because no one who does this for a living picks a date for a "volatility event" rather, they plan on it of course, but they already have a strategy with positive expectancy across assets where they aim to make money through volatility trading.
Timing specific events for volatility trading requires more than just the date...
Then you would have a reason to be long volatility...
You could just create a binary event say bond vol is up 1 deviation from normal, signal value goes to 1, etc, then equity vol goes down signal is 0 or -1...
Sum them all up and make some kind of quant indicator.
Because no one who does this for a living picks a date for a "volatility event" rather, they plan on it of course, but they already have a strategy with positive expectancy across assets where they aim to make money through volatility trading.
Timing specific events for volatility trading requires more than just the date...
The answer is that you could. However, there's a difference between expecting volatility versus determining the direction of price in reaction to changing volatility.
Thus, I'm under the impression the thread starter wants to pinpoint when to expect volatility and didn't want to disclose his strategy for exploiting such. That's the aspect I'm sharing...pinpointing an "expected volatility reaction". However, actual details of my trade signals (long or short) in reaction to the "volatility event" I won't disclose/share in this thread.
Therefore, I agree with you that nobody is going to pick a date for a "volatility event" and not have any plans to exploit such via a trade position unless they are pure academia or researcher (not traders).
Many different types of volatility trading methods.
Mark
note and study out SPY volume...that is a often overlooked indicator...
I look for tight Bollinger Bands occurring over several time frames
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