Where has the volatility gone?

[soft_trader]

Hi friends,

I am starting this thread to discuss about the volatility in our market.

I am trading regularly for almost a year now, but I noticed that in last one year Nifty has not moved beyond 3% or thereabout in a day.

But when I am watching the Historical charts of our markets, I saw that there are so many circuit days in the past. In between 2007-2010, 5%-8% moves in Nifty were a norm, but why we are not getting that type of volatility now.

Also I want to raise a point, what I noticed is US Indices don't move as much as our Indices. 2% change in DOW is very rare now, but whereas Nifty moves 2%-2.5% easily and we are getting these types of moves frequently also. So US markets has even much lower volatility than our markets. Again if we look at the PIIGS indices, then 5%, 6%, 8% move comes to their markets daily.

Yesterday I was reading an article that more the developed market it is, lesser the volatility. How true it is? And why extreme volatility has decreased from out markets, Let's discuss on this topic. All are welcome to jot down your thoughts and contribute to this thread.

 

[Sunny1]

phases and cycles.....are very old in stock market ...
They will come ...
some time
some patience
but they will come ....

Bull and bear cycles depend upon the economic growth ...as of now India economy is neither growing nor going back...

 

[soft_trader]

phases and cycles.....are very old in stock market ...
They will come ...
some time
some patience
but they will come ....

Bull and bear cycles depend upon the economic growth ...as of now India economy is neither growing nor going back...

That means in bull/bear cycles more intraday volatility occurs?

 

[milkyblack]

Hi friends,

I am starting this thread to discuss about the volatility in our market.

I am trading regularly for almost a year now, but I noticed that in last one year Nifty has not moved beyond 3% or thereabout in a day.

But when I am watching the Historical charts of our markets, I saw that there are so many circuit days in the past. In between 2007-2010, 5%-8% moves in Nifty were a norm, but why we are not getting that type of volatility now.

Also I want to raise a point, what I noticed is US Indices don't move as much as our Indices. 2% change in DOW is very rare now, but whereas Nifty moves 2%-2.5% easily and we are getting these types of moves frequently also. So US markets has even much lower volatility than our markets. Again if we look at the PIIGS indices, then 5%, 6%, 8% move comes to their markets daily.

Yesterday I was reading an article that more the developed market it is, lesser the volatility. How true it is? And why extreme volatility has decreased from out markets, Let's discuss on this topic. All are welcome to jot down your thoughts and contribute to this thread.

In my last 4 years of full time involvement in the markets as a full time trader and total exposure of above 8 years including the part time participation, I have a detailed analysis of Nifty. Based on that I might be able to put forward some of my views towards the discussion related to your post

The 1st thing is that the average closing change in Nifty has never exceeded 1% in the last 1000 days. Secondly as rightly pointed out above that markets move in phases, there are times of high volatility that is followed by low volatility. Just check 2004 to 2008 it was a period of high volatility, a bull market followed by a crash. Increasing the volatility in 2008-09 tremendously, as crash is not a usual phenomenon. A burst of bubble was followed by a high increase in volatility, resulting few circuits frequently.

Thirdly and the most scary and sadly looks to be a true part is that, our market is maturing. A mature market is ideally a good market, where the the volatility is limited, investors are protected etc. The bad thing is that for traders who want big bucks with small lot size and no respect to risk and money management suffers a lot. Traders who are versatile and adapt to changes, s/he would have already discounted the market volatility by optimizing the strategies used.

Global develop markets also had phases when it would move and swing like our very own Nifty, but then now they have developed and the volatility is gone. We are also in the same process, perhaps. You consider the other global developing markets, they have the same volatility that Nifty used to have.

But, irrespective of the market condition, which will keep one changing, a trader who survives with years of experience will be able to get money out of the market, without compromising much on the profitability.

Cheers !

 

[soft_trader]

Thirdly and the most scary and sadly looks to be a true part is that, our market is maturing. A mature market is ideally a good market, where the the volatility is limited, investors are protected etc. The bad thing is that for traders who want big bucks with small lot size and no respect to risk and money management suffers a lot. Traders who are versatile and adapt to changes, s/he would have already discounted the market volatility by optimizing the strategies used.

But, irrespective of the market condition, which will keep one changing, a trader who survives with years of experience will be able to get money out of the market, without compromising much on the profitability.

Cheers !

Thanks MB!! Thank you a lot for your ideas and thanks for this long post. Your post is of great help.

I also think so that our market is maturing. But as a trader we want volatility. Just thinking of May 2009 up-circuit day, profit should be very easy with such kind of volatility. Simple Straddle/Strangle will work like a charm. I am newbie in this market with just 1year of trading experience, and I never experienced any circuit days. I simply don't have any experience about circuit days.

And yes, you rightly pointed out that irrespective of the market volatility, good and disciplined trader will always make money.

Happy trading :thumb:

 

[milkyblack]

Thanks MB!! Thank you a lot for your ideas and thanks for this long post. Your post is of great help.

I also think so that our market is maturing. But as a trader we want volatility. Just thinking of May 2009 up-circuit day, profit should be very easy with such kind of volatility. Simple Straddle/Strangle will work like a charm. I am newbie in this market with just 1year of trading experience, and I never experienced any circuit days. I simply don't have any experience about circuit days.

And yes, you rightly pointed out that irrespective of the market volatility, good and disciplined trader will always make money.

Happy trading :thumb:

Thanks that you found my post useful.

Just imagine of those traders who were on the wrong side of trade in that up circuit day. Obviously there were many. People did not get time to exit at all on day 1 of circuit.

However good the trading system is, it always has got the losing trades also, it could have been on that day for many traders.

 

[soft_trader]

As you told that you are trading full time since last 4 years. Could you share your experience of 18th May 2009. I must have been a memorable day.

 

[BenjaminGates]

If the past had such phases, it is now time for a change. Stock market behaves in such a way that everyone's wishes come true at one time or other. Only you cant time it. And it can test your patience like nothing else, in case you decide not to time it but wait.

 

[milkyblack]

As you told that you are trading full time since last 4 years. Could you share your experience of 18th May 2009. I must have been a memorable day.

I am an intraday trader, so had no positions. Though as per the overnight strategy, it was a long trade. My friend took it, but not in futures, bought call options. As the risk with futures was high if it had gone against him.

And for me the next 3 days there were no trades even for intraday strategy

 

[augubhai]

Oh !!
Everyone is looking for Vola-Baba. He won't dissappoint his disciples. Will be back soon.