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What has happened to volatility

  • #21
  • May 4, 2017 10:06am May 4, 2017 10:06am
Quoting Darastonius
Just wait a minute, and he'll start going on about this actually being the most prosperous period in the markets, and he averages 300 pips every day on a 1 tick chart in 500 trades daily, and the main problem is, that we are actually much shittier traders than he is.
That may be the answer. Maybe we will have to take 500 trades a day to squeeze out a few drops of net pips.
  • #22
  • May 4, 2017 10:15am May 4, 2017 10:15am
You are clearly noobs who don't get the concept of leverage in the FX market.
  • #23
  • May 4, 2017 10:22am May 4, 2017 10:22am
Quoting The-Flipper
You are clearly noobs who don't get the concept of leverage in the FX market.
Of course, a typical breakdown of reasoning resulting in insulting others.
  • #24
  • Edited 10:46am May 4, 2017 10:31am | Edited 10:46am
Quoting Robertk
{quote} Thats not really a valid argument because GBPAUD has a different nature in terms of price ranges. Take the daily ATR per pair and use that as comparison material: G/A 200 +/- pips per day is the (50wk) daily average, eur/usd 80 +/- as comparison (50wk) G/A 160 +/- pips per day is the (1wk) daily average, eur/usd 60 +/- (1wk) Comes down to -20% of average G/A and -25% average E/U volatility. Not "that" big of a difference. https://www.mataf.net/en/forex/tools/volatility for your reference
I'm not saying that the vola isn't lower than few years ago but the last weeks and days the markets imo moved nicely, many good opportunities. And to me volatility also isn't everything, I rather have a clear movement/trend and only a middle volatility, than high vola and bullshit movement with spikes left and right lol
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #25
  • May 4, 2017 10:51am May 4, 2017 10:51am
https://www.mataf.net/en/forex/tools/volatility

Charts here show somewhat declining volatility for the last 6 years. Among the USD pairs, EU, GU, AU, NU, UChf, all down trend in volatility. UJ, UCad seem steady.

No statistical analysis, just eyeballing it, looks like increasing variance. Median day is lower, but plenty of days where vol spikes to 100, 150, 200 pips.

One veteran trader I know thinks the increase in HFT firms is a major factor. He refers to the trend as 'Light speed trading and then crickets'. Very tough to make money intra-day when price crawls along in a 10-20 pip range for hours then shoots 40, 60, 100 pips in a matter of minutes (or seconds).

Also a good bet that low volatility with slow steady climb in equities is what the Big Money, Central Banks, and Politicians want. (Also keep a lid on Gold prices)
Attached Images
Novice trader, please take my opinion with several grains of salt
  • #26
  • May 4, 2017 10:55am May 4, 2017 10:55am
Quoting michisuperfr
{quote} I'm not saying that the vola isn't lower than few years ago but the last weeks and days the markets imo moved nicely, many good opportunities. And to me volatility also isn't everything, I rather have a clear momentum/trend and only a middle volatility, than high vola and bullshit movement with spikes left and right lol
It all depends on your trading style. If you're a medium term swing trader, you probably act on pattern breakout (like double top, engulfing pattern, H&S etc.) near top of the swing wave with relatively tight SL. If there is low volatility, there is statistically less chance, you will see a breakout follow trough. If price then just returns to range, your tight SL will probably get hit. If you place it outside consolidation area, your reward to risk ratio suffers (win rate goes higher, but at least in my case, it doesn't compensate for worsened RR ratio completely, so my profit curve flattens considerably).
  • #27
  • May 4, 2017 12:54pm May 4, 2017 12:54pm
I would guess it's also cyclical and this might simply be a 'trough' period in historical volatility.
  • #28
  • May 4, 2017 1:02pm May 4, 2017 1:02pm
The GBP crosses seem to stay most volatile, especially GBPCAD, GBPAUD, GBPJPY. Which exotics are most volatile with a proportionally small spread?
  • #29
  • Edited 11:33pm May 4, 2017 7:37pm | Edited 11:33pm
Quoting TGS
Which exotics are most volatile with a proportionally small spread?
FWIW, here's a list of the 28 pairs showing (left to right) ADR, current spread (Pepperstone), and spread as a % of ADR. Sorted in descending order of ADR:
Attached Image

Here's another screenshot, taken a couple of minutes later, this time sorted in descending order of the spread%:
Attached Image

And the indicator used to display these (latest version attached below, settings used to obtain the above displays in the screenshot):
Attached Image (click to enlarge)
Click to Enlarge Name: PPI 305.png Size: 46 KB
Attached File(s)
File Type: ex4 Display Info All Pairs.ex4   34 KB | 417 downloads
  • #30
  • May 4, 2017 8:04pm May 4, 2017 8:04pm
Quoting Tom81
{quote} EUR/USD 130 pips weekly volatility not bad? This used to be near daily volatility for this pairs. Similar with all majors... According to John Kicklighter at dailyFX, "the current 8-day range for the $SPY ETF (S&P 500) is the fifth smallest in 23 years" If this is not super low volatility, I don't know what it is.
Oh yes? But Warren Buffet still makes huge money... We already experienced low volatility several years ago and we witnessed that many trend following systems stopped working during that period. Many people decided to move to higher TF or lower TF. Try high volatility pairs such as GA or EN if you like....
Simplicity is the ultimate sophistication - Leonardo da Vinci
  • #31
  • May 4, 2017 8:15pm May 4, 2017 8:15pm
The ratio between the spread(cost) and ADR is one of the most important factors. But strangely many people overlook this.
For example 10 pips ADR in EURUSD will be awesome if the spread is 0.001 pips and if you have access to very high leverage.
In terms of volatility today the markets are around the levels from 2005-2006.

Some people think that 150-200 pips ADR in EURUSD was a great thing. But they forget the fact that the average spread in 2005 was 2-3 pips.

The worst thing today is not the volatility but the fact that the volumes are declining because many of large players left the market.
This is not good for us.
I don't care about the small ranges, as long as the cost is low and the price moves a lot during the sessions.
Unfortunately today the market is very slow even during EU/US sessions.
  • #32
  • May 4, 2017 9:08pm May 4, 2017 9:08pm
Quoting hanover
{quote} FWIW, here's a list of the 28 pairs showing (left to right) ADR, current spread (Pepperstone), and spread as a % of ADR. Sorted in descending order of ADR: {image} Here's another screenshot, taken a couple of minutes later, this time sorted in descending order of the spread%: {image} And the indicator used to display these (latest version attached below): {file}
Hanover, that indicator is great!

Thanks mate
Luck is where preparation meets opportunity.......
  • #33
  • May 4, 2017 11:35pm May 4, 2017 11:35pm
Quoting Ozzie Taz
that indicator is great! Thanks mate
Glad you like the indicator; btw, I first posted it on FF back in 2010 !!
  • #34
  • May 5, 2017 8:26am May 5, 2017 8:26am
Quoting alphaomega
The worst thing today is not the volatility but the fact that the volumes are declining because many of large players left the market.
What institutions or who were the big players and, where did they go?
  • #35
  • May 5, 2017 8:58am May 5, 2017 8:58am
Quoting TGS
{quote} What institutions or who were the big players and, where did they go?
I can give you hundreds of examples, and this is only from the information which I have. You can imagine what the actual statistics are.

But just to mention a few examples:

FX Concepts (The largest FX hedge fund ever) left the market (closed)

Many, many other smaller hedge funds also left the market in last few years.

Previously (10 years ago) almost all of the major banks had prop desks where they speculated with their available capital. This was by far the biggest driver of the markets. As you can image these banks traded huge volumes, so they create most of the price action.
All of this is gone now.
Because the regulations today do no allow the big banks to trade (speculate) for their own account. You can read more details about this here
https://en.wikipedia.org/wiki/Volcker_Rule

The other major factor for the lower volumes is the death of the carry trade, due to extremely low interest rates for the major currencies.
In the previous decade we had much higher interest rates and larger gaps between the highest and lowest rates. This creates a lot of great opportunities for long term carry positions.
As a result, a lot of large players and investors(including institutions) from all corners of the markets are attracted to FX. This generates a lot of volume and increases the tendency for the market to move in trends. Today all of this is gone!
And this is precisely the reason why trend following strategies today do not perform very well in FX. Over time the markets get slower and choppy (more randomness, less trends).
  • #36
  • May 5, 2017 10:03am May 5, 2017 10:03am
Very interesting article about falling FX volumes. Basically it says more risk-averse players on the market and more longer term transact FX for hedging rather than speculative risk-taking purposes...

https://seekingalpha.com/article/403...illion-per-day
  • #37
  • Edited 7:07pm May 7, 2017 5:24pm | Edited 7:07pm
Since no one has directly addressed the OP's question, I'll take this opportunity on a Sunday break from work to direct your attention to what might be causing the liquidity squeeze now in effect in FX.

I can pretty much sum up the problem with three simple letters: SDR.

If you don't already know what that means, I'm not going to spend time offering an education on its establishment as a global "currency" but I will say that what has already been put into motion by the Bank of International Settlements, and support by every major government worldwide (including the United States Congress) is precisely what will eventually lead to a staged restructuring of the weighting in the major currency now considered the Petro Dollar - the USD.

What you are witnessing right now is a global currency reset taking place. This will essentially shift the USD out of the role it had been occupying since the Brettonwoods Agreement. The "carrier wave" for this transition will be the SDR, aka "Spcialty Drawing Rights" currency inside of which the mechanisms for many things operating behind the scenes will be positioned, primarily through the repositioning or rebalancing of the weight that major currencies such as the USD will have in global transactions going forward and subsequent to 2020.

As Traders, it is important for you to understand the major players behind the liquidity of the markets you trade, but it also equally important to remain as intune as possible to the movements of BIS, as everything allowed to happen with respect to currencies for the most part will come from that source, including massive restructuring, that is now taking place right before your eyes.

Essntially, several years ago, the US Congress slipped yet another bill past the American People, that basically set the stage for imploding the USD on purpose. What you have been seeing and what will continue to get worse is inflationary pressure domestically here in the US, coupled to reductions in government debt being acquired by countries outside the US.

Those of us in the US are about to experience a level of unprecedented cost increases as a direct result of inflation. The reason for this is that as foreign purchases of US debt decreases and as the Petro Dollar deminishes and finally converts, there will be an initial increase of USD back into US circulation from abroad, as foreign buyers of oil will no longer need to maintain the same levels of reserve currency in the form of USD. This will place an abundance of USD on the street causing basic supply/demand functions to initiate as expected, resulting in an increase in inflation here in the US. Essentially, what Congress did was sign the death warrant of the USD globally. In time, you will see more of the effect.

In the meantime, you will see compression in the Magnitudes of daily movements in many currency pairs involving the USD as base currency.

At the same time, there will be nice increases in volatility in certain other currencies around the world as a direct result. Finding those currency pairs won't be difficult for the FX Trader with good situational awareness of the market they claim as their primary business.

Successful trading!
The Event Horizon
  • #38
  • May 7, 2017 8:24pm May 7, 2017 8:24pm
Quoting iDouble
Since no one has directly addressed the OP's question, I'll take this opportunity on a Sunday break from work to direct your attention to what might be causing the liquidity squeeze now in effect in FX. I can pretty much sum up the problem with three simple letters: SDR. If you don't already know what that means, I'm not going to spend time offering an education on its establishment as a global "currency" but I will say that what has already been put into motion by the Bank of International Settlements, and support by every major government worldwide...
Haha... man. You are goddamn right.

And yes, we (or some of us) already found the new golden fx goose. It's called BTC!
Attached Image (click to enlarge)
Click to Enlarge Name: BTC.png Size: 58 KB


This baby is ready to rock and roll. It's going through the roof as we speak.
Up 234% only for the last year. Up 29% only in the last month.
It's one of the largest, if not THE largest bubble in human history.
Be ready to ride the waves both ways.
We are going to make a killing with this garbage!
  • #39
  • May 7, 2017 9:01pm May 7, 2017 9:01pm
Quoting alphaomega
{quote} Haha... man. You are goddamn right. And yes, we (or some of us) already found the new golden fx goose. It's called BTC! {image} This baby is ready to rock and roll. It's going through the roof as we speak. Up 234% only for the last year. Up 29% only in the last month. It's one of the largest, if not THE largest bubble in human history. Be ready to ride the waves both ways. We are going to make a killing with this garbage!
I was thinking something more along the lines of pairs like GBPNZD. The USD is connected to both as Counter Currency and that, coupled to the changes I describe above, is what will continue to drive the nice volatility in pairs similar to that - especially if they are included in the SDR.

Regarding, BTC. I am so glad my platform does not contain this stuff. If it did, I would toss it in the trash can. Who other than a Bucket Shop is offering this. Wow. Not even my Test Broker has this stuff on its platform. Just make sure you can make a withdrawal after the smoke clears. You don't want to be stuck with one of those brokers who accepts deposit request but rejects withdrawals requests. Frankly, I would lean a 'bit' more on traditional pairings - but whatever floats your boat.

Successful trading - just don't get run over by that freight train being naked and one sided on a BTC trade.
The Event Horizon
  • #40
  • May 8, 2017 1:47am May 8, 2017 1:47am
Quoting alphaomega
{quote} Haha... man. You are goddamn right. And yes, we (or some of us) already found the new golden fx goose. It's called BTC! {image} This baby is ready to rock and roll. It's going through the roof as we speak. Up 234% only for the last year. Up 29% only in the last month. It's one of the largest, if not THE largest bubble in human history. Be ready to ride the waves both ways. We are going to make a killing with this garbage!
Do you happen to know which broker offers the lowest spread for trading BTC? I would like to check out its volatility on demo.
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