Oh for the volatility of yesteryear. Or is it better now ?

Author: Mike Paterson | Category: Education

There is always much talk/complaint about the volatility/whipsaws in these markets

In my days as an interbank trader and market maker ( 1980s/90s) we had days/weeks when we’d be dealing on  multi big-figure spreads due to market volatility. Sometimes as much as  1000 + pips  for each quote, in and out.

Fancy making a price in  USD 50-200 mln in those conditions, and then not seeing the offer or bid for dust ? Plenty of opportunity to deal in between through the brokers in theory but blink and you missed it. 10 big figures up and down in a matter of minutes/hours was a test of skill, luck and nether regions , and no wonder we needed a drink after ( and sometimes during when we could get off our seats!)

So what have we had this year and the past couple of years? Relative peace and calm as the chart shows.

EURUSD Daily 29 Nov 2013

EURUSD Daily 29 Nov 2013

So far in 2013 we’ve had 1.2740-1.3833 with the previous tightest year in 2001 when we saw 0.8350-0.9585 ( hands up if you’re old enough to remember trading down there !).

The broadest range came in 2008 as the financial crisis kicked in and we saw 37 cents between 1.2329-1.6040.

The average yearly range over the 1999-2012 period is 21.25 cents so this year sees 50% off that with just one month to go.

Morale of the story ? Well, when you get all het up and angry ‘cos you’ve been whipped out of a position for 50 tics on some news or other just be a tad grateful that that’s all its cost you !

On the other hand, the lack of volatility means that we have to wait a longer time for winning positions and shorter term traders such as me can find sitting on our hands a real test of discipline. And scalping for a pip is really not my style.

At least being this ( retail) side of the fence though the choice of how we play it is entirely ours.

What say you?

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