FOREX QUANT

April 13, 2007

A dead ended discussion

Filed under: Uncategorized — by TraderMade @ 7:18 pm
Tags: , , , ,

A dead-ended discussion about volatility on this Elitetrader forum.
There were only me, Truestory and ElectricSavant who added to the conversation.
Hundreds of hits on that thread, but nobody replied.
Nobody really understand about the market.
LOLLLL !!!!

Me:
pardon me,
im a newbie in this forum.
does anyone notice a much smaller volatility in forex’ intraday behavior ?
when i place a 300 or 500 bar average true range on 15minute charts of eurusd, gbpusd, usdchf, usdjpy, they are declining a lot since november 2006.
what may cause this ?
is it a more stable global economy ?
more liquidity in the spot market ?
less liquidity ?
please advice.
thank you.

TrueStory:
It’s natural. Volatility goes up and down in cycles. Since November, you’re right, it has come down some, especially in certain pairs. But it will rise again as we move to new congestion levels as economies and interest rates change…

Me:
TrueStory, thank you for your relieving answer.
I run a volatility-dependent system, and I have less-frequent trades these days. I start to worry about the market, will it move more in the future, more volatility like the past time..
I’m not quite understand the correlation between market’s liquidity and volatility. There must be some correlation, but is it negatively or positively correlated ?
Thank you..

TrueStory:
I believe the relationship between liquidity and volatility is too dependent on other factors to be easily defined. It also depends on whether you’re looking at short-term or longer-term volatility.

Me:
Ive been exploiting short term volatility for mechanical system design, but has never been learning what fundamental factors do determine volatility.
Could anyone please point me where to look at this, any books or other resources ? Thank you so much.

ElectricSavant:
yeah…it’s like this…what picture am I being presented? right?

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