Why do Indexes lose volatility?

And to answer your questions, I am not trying to understand why people lose interest in a certain instrument.

In fact, I pointed out how ES dropped in volatility yet it more than doubled its daily volume.

ES clearly become more popular and more interesting, more traders have joined it yet its volatility has made less it attractive to my trading style.

Of course, it depends on what your trading style is. If you are a position trader, ES might be a good instrument.

If you are a daytrader, I believe there are better instruments out there to trade such as ER2, NQ and even YM, which averages about 100 ticks per day.

Volatility creates opportunities, and opportunities usually lead to money.
 
Where do you guys get the actual volatility for "futures" from?
I would like to have the actual numbers for the YM, ES etc.

VIX is the S&P 500 30 day volatility and therefore not really useful for me.

Thanks Max
 
as the volatility decreases make your size larger to experience larger profit

as other people do this, volatility gets back

oh the cycles, the never ending cycles

drive me mad them cycles

god damn cycles :D :D :D :D :D :D
 
Quote from fseitun:

In fact, I pointed out how ES dropped in volatility yet it more than doubled its daily volume.

ES clearly become more popular and more interesting, more traders have joined it yet its volatility has made less it attractive to my trading style.

If you are a daytrader, I believe there are better instruments out there to trade such as ER2, NQ and even YM, which averages about 100 ticks per day.

Volatility creates opportunities, and opportunities usually lead to money.
More...

I think you may have the answer to your question right there... in these futures markets that you are looking at, let's see how they operate:
ES - most volume, tighter ranges recently
NQ - good volume, ranges better than ES (but can be worth less in terms of $$$)
YM - ok/weak volume and at $5/point not that profitable
ER2 - the crazy one of the group - decent volume and very 'jumpy'. This 'jumpiness' however can provide very profitable moves if you are correct.

At first glance, one could argue that TOO much volume can dry up the volatility and daily ranges. Someone else pointed out though you can do much more volume on the ES, so if you trade 50, 75, or 100 contracts at a time, the ES is basically the only e-mini futures market to do this at.

I'd recommend you also look at:
EC/6E (Euro FX full size contract) - volume comparable to the ER2, but at $12.50/tick you do not need huge ranges although we do see nice ranges and volatility there as well.
QM (Crude Oil miNY) - lower volume, but at $12.50/tick this thing can provide tremendous volatility.
 
The tick size of ES is too wide making it relatively unattractive for intraday traders. A smaller tick allows for a better risk/reward on the intraday. As a result the ER2 and NQ are more popular.

The YM was hampered by not allowing native stops making it difficult to catch breakouts or pivot break stops without a lot of slippage making for unattractive intraday risk/reward. Perhaps the CME will correct this with the merger - the way the Dow has been moving this index should be the most attractive for intraday traders if not for the handicap.

Intraday volatility in the equity indexes seems to go where traders get a better deal on risk/reward - tick size & native stops.
 
Quote from hamrawein:

Where do you guys get the actual volatility for "futures" from?
I would like to have the actual numbers for the YM, ES etc.

VIX is the S&P 500 30 day volatility and therefore not really useful for me.

Thanks Max
More...

I suggest you first indicate what type of volatility you are looking for.

As a daytrader, I measure volatility in terms of # of ticks per day. That's all that matters to me.

I am sure this would change if I were a swing trader.

How would you like to measure volatility?
 
Here is how I measure daily volatility of US indices:

- setup a daily chart with ATR (21)

- multiply ATR # by # of ticks per point

- total # of ticks provides you with daily volatility

Let's look at how US indices compare with each other:

ER2: 11 * 10 = 110 ticks per day
Volume MA (100): 174K
Tick value: $10

NQ: 23 * 4 = 92 ticks per day
Volume MA (100): 309K
Tick value: $5

YM: 88 * 1 = 88 ticks per day
Volume MA (100): 98K
Tick value: $5

ES: 10 * 4 = 40 ticks per day
Volume MA (100): 1M
Tick value: $12.50

EURFX: 75 * 1 = 75 ticks per day
Volume MA (100): 135K
Tick value: $12.50


As you can see above, ER2 is the most volatile index of all, followed by NQ and YM. ES is almost 3 times less volatile as ER2.

ES is by far the most liquid market of all, averaging slightly above 1 million contracts exchanged per day. It looks like its drop in volatility and rise in volume in recent years explain how ES has probably become the ideal market for scalpers and large institution funds.

As to tick value, ES and EURFX have the highest with $12.50, followed by ER2 with $10. YM and NQ rank last with $5 per tick.

In conclusion, for daytraders with a capital greater than $50K, ER2 looks like the best market to trade in terms of volatility, tick value and volume.

I personally don't feel ready to trade at a $10 per tick clip, hence a good compromise definetely is NQ, which offers good volatility and better volume than ER2.

YM is the same as NQ, only difference being liquidity, which could cause some slippage if you trade more than 10 contracts at the time.

On separate note, EURFX does offer decent volatility and good liquidity....the only problem being that currencies trade 24hr...thus, that volatility is distributed over a 24hr span...

I dont think EURFX is a good market for daytraders. I think it's great for swing trading, same for ES.
 
Quote from Vol:

Daily range for SPX '64-'06. Has been down before, then came back up. Is it different this time?
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Interesting chart. It looks like volatility is doomed to pick up at some point.
 
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