Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

Does the Volatility Return Back to Normal?

1 min read

Volatility is Dead in November. The intraday trading range got drastically reduced throughout the days of Nov 2019 series. Could be frustrating most of the directional traders. 10 Day ATR of Nifty Futures is at the lowest level for the year 2019. Will the volatility ever will revive? This post will try to study Nifty Futures volatility and understand volatility compression and expansion and how it helps traders to stick to reality.

What is Volatility compression?

There are various ways to measure volatility. One of my favorite way of measuring volatility is using the indicator Average True Range (ATR). To determine the short term volatility I prefer using 10-day ATR on the Daily timeframe.

The extreme volatility which is witnessed post the corporate tax cut has been cooled off with a decline in 10day ATR during the Oct & Nov 2019 period.

Volatility compression from the peak volatility is a gradual measure of reduction in intraday trading range followed by tight price and volatility compression.

For any volatility reversals to happen intraday trading range has to get past 10-day volatility which is missing in most of the days of November and current 10-day ATR stands at 103 levels. Possibly intraday range breaking above 103 levels are the clear indications of volatility is returning back to normal with possible trendy price action.

I guess the days are not so far. Events like GDP Announcement, Saudi Aramco World Biggest IPO, RBI Policy announcements are lined which could bring back the animal spirits of the traders and so the volatility in the markets. Until then traders have to stick to reality and learn to control their directional market expectations.

Remember These kinds of dull boring & Compressed sideways market usually distracts the crowd to miss the trend. Or make them tired and bring the trend. Either way not many are going to onboard the trend when it arrives. Stay patient and wait for the move to happen to participate in the trend.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

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