When will the volatility return?
- Thread starter TriPack
- Start date
I can't speak for others, but I articulated my reasons in another thread, which I will replicate below:
"Main reasons:
- Cheaper execution for an equivalent $ face value...
- More favorable tax treatment...
- No fucking around attempting to shift what would be size in the stockmarket... in the futures markets, even 20 contracts of ES (face value not far off $1million) is easy to shift, cos 20 cars is small fry in the world of futures...
Secondary reason:
- Laziness: got fed up with scanning for stocks plays... easier to just play one or two futures contracts all day long...
The trade-off to my laziness is that I don't get the major occasional runs on stocks benefitting from news... however I guarantee you that your life as a stock trader is more intense than mine... so, as with many things, individual personality has a lot to do with what you trade...
That said, in relative size, you can make a living off anything with reasonable volatility... and, in my view, ES is more consistently volatile than any stock you care to name... bearing this in mind, my philosophy is to make things easy for myself by eliminating the need to scan..."
Quote from Girlpower:
That seems like a fair comment Ken. I've recently gone back to trading a few stocks and found it to be very much easier than futures. After dealing with all the difficulties you have aluded to for a long time, I'm finding the pace slower, the moves easier to read and cleaner, and plenty of choice on the list to pick the 4 or 5 best ones at that time.
On the other hand, it can be more tricky to get short on stocks with the uptick rule etc., and the gearing is much lower even margined.
Please no-one take this the wrong way, but I am starting to think that the best way an intaday stock trader can improve their stock trading skills, is to trade futures for a bit in this kind of market conditions and try reading the ES tape instead of a stock tape - it's much more crowded and runs a lot faster while going nowhere much. trading one or 2 futures intruments, you get to learn a much wider range of skills, beause you have to.
There isn't the ability to be able to cherry pick what looks good today for the methods I have, it becomes more a case of which method is going to be good for today's market. or how can I read and play what it is throwing at me now. I think that to keep going with only a couple of instruments available to you, you have to become much more inventive to deal with it.
But to me it seems that it is actually a different set of skills.
For stocks, having 3 or 4 very solid methods that work very well indeed, and then scanning the 500 or so most liquid issues for those that conform well to the moethods, and then trading them according to the method is a skill in itself and shouldn't be underestimated. It will usually pull up soemthing during the day, and the key is to be dilligent in the scanning and assess the stock quickly for compliance in order to not miss the opportunity. That is a big skill.
For the 2 or 3 E-mini futures, it is the reverse, - more a case of scanning the methods available to find which will work well on the few issues available as they are presenting themselves at the moment, and being able to recognise which method fits the market action quickly so that the opportunity is not missed. That is a different skill.
Both are equally valid skills and both are equally important in the trading of the individual instrument classes, and neither is any easier than the other in reality.
But I wonder how much the opportunity increases when you apply the skills from the futures to the stocks, and the skills from the stocks to a much wider range of global futures...
(I'm probably going to get slated for these comments...- no offense intended to anyone by them).
kind regards
Natalie
Excellent post, Natalie...
We have made the consolidation: 9405 is the first local bottom target on weekly scale (better precision see on lower scale : it was 9370 see chart incidentally here http://www.elitetrader.com/vb/showthread.php?s=&threadid=21973&perpage=6&pagenumber=3) and bounced back from there so bulls don't worry yet on that scale. The 10000 target is still valid and must be confirmed by passing the yellow resistance at 9563 (at daily close and weekly close since it is weekly scale which must be confirmed by opening of next period).
<IMG SRC=http://www.econometric-wave.com/consolidation_on_weekly_scale.gif>
<IMG SRC=http://www.econometric-wave.com/consolidation_on_weekly_scale.gif>
As for people that have spoken earlier on this thread about a "lack" of volatility, I hate to break it to you, but these are the REAL FACTS OF THE MATTER:
Over the last 3.3 years, the frequency of a monthly move in which there was OVER a 10% move ( from low to high, or vice-versa ) was 41%, or roughly 5 out of 12 months.
On a historical basis, over the past 54 years the market has averaged a monthly move > than 10% just NINE PERCENT OF THE TIME, OR ABOUT ONE MONTH PER YEAR.
P.S. The last time that we saw some very high frequency of monthloy moves > 10% was 1973, 1974, 1975.
25%
Over the last 3.3 years, the frequency of a monthly move in which there was OVER a 10% move ( from low to high, or vice-versa ) was 41%, or roughly 5 out of 12 months.
On a historical basis, over the past 54 years the market has averaged a monthly move > than 10% just NINE PERCENT OF THE TIME, OR ABOUT ONE MONTH PER YEAR.
P.S. The last time that we saw some very high frequency of monthloy moves > 10% was 1973, 1974, 1975.
25%
You might want to look at three other places to get a nice handle on the comtemporary scene, vis a vis volatility. They aren't a big deal but it does show that creating profits nowadays is really just there and grinding right along. Most are indirect measures that replace or front run the coming volatility stuff.
The H/L's that were almost continuous "consolidation" in the market as near term history, summer, up to mid last week have ended. The expanding H/L is setting up at least four trend trades a day now. So the fireworks are here for the last quarter at long last.
The IT legs in the quarterly time between rollover's (third Q have all been movers except 1 flat leg of the 10 in the Q). This is a high number of IT legs. The compression in equities cycles showed up as half the "normal" variation with almost no lessening of the cycle H/L range for high beta (volatility's bro) equitities. Both these items fit together nicely.
The indicator that has come up that favors increased volatility has shown up also in the Z. The offset of cash to indexes is six times greater at the beginning of the Z than it was for the beginning of U. The transients at open are neat and orderly as the offset is stabilized each morning as well. So retraces on gaps will not be in vogue for a while as we found out last week too..
There hasn't really been a case for volatility for quite a while for all the reasons derivative of the above. Who cares, when it really isn't a possibility.
Now it is going to be a reality, but a lot of people are shell shocked by not understanding it's reasonably explained absence.
A lot of "hope" stuff being expressed in the space at present.
Forget about measuring volatility in longer than partial day terms. The 1, 2, 3, 4, 5, day stuff is silly.
The H/L's that were almost continuous "consolidation" in the market as near term history, summer, up to mid last week have ended. The expanding H/L is setting up at least four trend trades a day now. So the fireworks are here for the last quarter at long last.
The IT legs in the quarterly time between rollover's (third Q have all been movers except 1 flat leg of the 10 in the Q). This is a high number of IT legs. The compression in equities cycles showed up as half the "normal" variation with almost no lessening of the cycle H/L range for high beta (volatility's bro) equitities. Both these items fit together nicely.
The indicator that has come up that favors increased volatility has shown up also in the Z. The offset of cash to indexes is six times greater at the beginning of the Z than it was for the beginning of U. The transients at open are neat and orderly as the offset is stabilized each morning as well. So retraces on gaps will not be in vogue for a while as we found out last week too..
There hasn't really been a case for volatility for quite a while for all the reasons derivative of the above. Who cares, when it really isn't a possibility.
Now it is going to be a reality, but a lot of people are shell shocked by not understanding it's reasonably explained absence.
A lot of "hope" stuff being expressed in the space at present.
Forget about measuring volatility in longer than partial day terms. The 1, 2, 3, 4, 5, day stuff is silly.
I could not agree more! The fat from a move such as we have had must be worked off, if it is not, then an unpredictable and action packed reversal will occur with no volatility contraction. Needless to say, that is rare on something like the S&P which is both an index (relatively diversified event risk) and has very substantial institutional interest! Once new positions are entrenched, we simply need a spark and volatility will take off again.
Nice post vegasoul,
-TD80
Nice post vegasoul,
-TD80