“SUMMARY VOLATILITY TABLE” RAW DATA POSTED

 

“Remember, everything is built from raw data … everything!”

Over in the right-hand column, under “Download Links”, I’ve posted the raw data for “The Magnificent Seven”; 2017 8HR [08:00 – 16:00 Turnkey Forex live server time] & 2012 – 2017 weekly data on all 7 markets. The individual markets have been consolidated into one directory, and from there, you can pick and choose which market(s) to view and study at your discretion; for those that want to download the data, compiling the format into one folder makes it easy and handy, rather than doing 7 separate downloads. As always here on my website, anything available for viewing and/or download is free to everyone … all files are on my shared file folder at box.com in Adobe PDF and can be viewed or downloaded via any OS, on any device you choose to surf the web.

Just so everybody is on the same page, and there’s no confusion from either Newbies, or those not so mathematically inclined, I think it would be helpful to go over some of the “data fields” used in the “Volatility Summary Table.

The term “average”, is simply a simple average of data points … what should be recognized, though, is that in any large sample of data, there will be days where there will be “outliers”; data that is far from the “mean”, or from the other days. For example, if I looked at the weekly range [high bid – low bid] during 100 weeks in EURUSD, and found 99 weeks had ranges from 80 to 100, and then on week 100, it had a range of 200, that “outlier” week alone would increase the average for all data up approximately 2% higher than it would have been without that data set.

To get around that “skewing” of possible hundreds or thousands of data points, I also use the term “median”, which is the number that lies at the “midpoint” of all data; in other words, the scope of moves is measured relative to all other data points, to that point where 50% of the data points are below the median, and 50% are above the median. When you compare “averages” with “medians” for the same data, you can immediately recognize the “skew” of the data, or in our case each market. And what you’ll notice is that in almost every FX market over time [large sets of data], the number of 8HR periods & weekly data points that “skew” the data upward, are larger in frequency than those periods where the data is “skewed” lower. As such, as a general rule, you can expect the “average” to be higher than the “mean” in almost all markets over time.

The key question, though, is by how much; for example, from the table, GBPJPY has a weekly average over the 6-year period from 2012 – 2017 of 378.6 PIPS, and a median of 283.9 PIPS … that’s almost 100 PIPS difference, and the gap as a percentage of the median [94.7 / 283.9] is a whopping 33.36%. What does this tell us? Well, for starters, it says GBPJPY has some wild days and weeks with “blowout” ranges, and then quiets down … the ramifications of this are obvious; “how do you know which is gonna be which”? … SHORT ANSWER: “You don’t, and that’s what makes trading GBPJPY so very difficult in capturing moves … most of the time it’s quiet, and not taking a profit off a small spike will cost you … then, just after a small profit is taken … BOOM! … Up/down it goes 150+ PIPS in 4 minutes and you’re left standing at the train station as the train rockets down the tracks”.

On the other hand, from the table, USDCAD has a weekly average over the 6-year period from 2012 – 2017 of 196.2 PIPS, and a median of 151.4 PIPS … that’s approximately 45 PIPs, and is more than 50% less in PIPS than GBPJPY. and the gap as a percentage of the median [44.8 / 151.4] is 29.59%. Of course, pretty much everybody knows that USDCAD is “less volatile” than GBPJPY without any math … now, you can see by just how much and not have to guess.

Same holds true with the 8HR, which is the busiest time of day by volume and by scope; i.e., the 08:00 – 16:00 server time at Turnkey Forex, which is the period that gets leftover Asian session scraps, the full European business day, and about the first 4 – 5 hours of the U.S. session. No other 8HR comes close. Here, GBPJPY has an average range of 101.6 PIPS, and a median range of 79.5 PIPS, the difference being 22.1 PIPS, and as a percentage of the median, [22.1/79.5] of 27.8% … again, it’s “feast or famine” in GBPJPY. EURUSD, by comparison, has an average range of 56.4 PIPS, and a median range of 45.0 PIPS, the difference being 11.4 PIPS, and as a percentage of the median, [11.4/45.0] of 25.33% … not that significantly different from GBPJPY in terms of percentages, but in terms of PIPS, a huge difference. Ok, what does it mean?

It means EURUSD trading action day-to-day, is a whole lot more consistent and stable than GBPJPY … and especially if your trading horizon is more short term along scalping lines, you’re much better off being in EURUSD than GBPJPY for 2 very big reasons; 1) EURUSD is more consistent, and 2) the “blowouts” in GBPJPY don’t always go in your favor, and taking the sting out of your donkey after a 2 M1 stop hunt for 50 PIPS that sees your stop getting filled near the extreme, isn’t easy to make back. That’s not to say any of the FX pairs don’t have their respective “moments”; they most certainly do, and this last week in EURUSD makes that case pretty strongly, as on Friday’s Merkel news, it shot up through stops by 40+ PIPS in a matter of a second or two. What I’m pointing out are the relative probabilities, and when it comes to trading, probabilities are all we have.

In looking at the table, it’s curious to note the somewhat “contradictions” in the data between EURUSD versus USDCAD. For EURUSD, the average weekly range is 221.1, and for USDCAD it is 196.2 … a slightly better than 20% edge to EURUSD … but in 2017, the 8HR paints a different picture; for EURUSD, the average 8HR range is 56.4, and for USDCAD it is 68.7 … a slightly LESS than 18% edge to USDCAD … can this be explained?

Over the 6 years from 2012 through 2017, both pairs had extraordinary events that rocked each pair; EURUSD had their “Grexit” crisis [Greece] which sent volatility in EURUSD up significantly over a two year period; USDCAD had the oil crisis, which saw oil prices plummet from $115 per bbl. down to $26 per bbl., and saw USDCAD likewise see increased volatility. So, it’s not these events which can explain the difference. The difference lies in the fact EURUSD has good moves [ranges] the last 2 hours of Asia into the European session, and also has, along with USDCAD, the entire U.S. session afternoon to put in some good numbers. Overall, in the other 16 hours that make up the trading day, EURUSD is a larger mover than USDCAD. Quite frankly, for the vast majority of the time, USDCAD is a North American market, whereas EURUSD is a world market.

Depending on a trader’s preference, both EURUSD & USDCAD look to be almost even in terms of volatility and PIP moves, but there are things to consider; 1) it costs about 2/10^th’s of a PIP more to trade USDCAD than EURUSD; if you trade 1 lots [100,000], 4 trades a day * 250 trading days = $2,000 you’ve just handed to the brokerage house and LP banks; is trading USDCAD worth 2K per year to trade for a 1 lot trader? 2) what hours do you like to trade? Depending on where you’re at in the world, one or the other is going to be much more advantageous to trade for you versus the other. Simply put, lifestyle matters.

What it all boils down to, though, is giving you professional trader insights, where nobody else anywhere comes close. I’ve said this before, but it bears repeating for Newbie traders and/or newer visitors to the website; “I’ve been in your shoes … I’ve walked the path most of you are walking now … I know how very tough and hard trading can be, especially when first starting out … and the dirty little secret is, as 2017 showed, nobody is immune to the paradigm shifts and market changes … you’ve got to be constantly on your toes, and willing to adjust to changing markets or paradigms … and in that struggle, you need valuable information that can help your trading, especially when it comes to your reward/risk profile; so, the premise of the data and the subsequent “Summary Table”, is not to bury everybody in useless ‘bat guano” data you can find on CNBC, but to help you realize the subtleties of trading and to get you critically thinking about trading, and the markets you should be trading and the markets you should ignore … that’s the purpose of the data”.

In all likelihood, I could take the “Summary Volatility Table”, and write a 500+ page trading book … not just from what I’ve learned in its compilation and subsequent analysis, which is plenty, but also from studying it and coming up with questions I never thought of before … it’s been a fascinating journey, and it’s only just begun!

As always, if anyone has any questions/comments about the data or the table, please email me and I’ll get back to you with a personal response ASAP. Enjoy the data, and I’ll be back tomorrow with an afternoon post.

   

Have a great rest of your MLK Holiday weekend everybody!

-vegas

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