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The Importance of Detrended Data


Someone posted recently seasonal information. By in large a useful subset, but with limitations. They're all mostly contrarian fade plays.

The International Trade Report is delivered every third week of every month. Corn after harvest has a selloff. Cocoa and oil's volatility during moderate US tropical hurricane season has a selloff. Energy across the board buys when the children go back to school. The list goes on and on...

Countries' top-performing futures indexes compared to each their Fed and inventory numbers can be monitored for directional bias. Overall futures rollover every fiscal quarter.

The knowns.

I'ld caution new traders and investors from being side-tracked by dreams of large profits during these times. Statistically, these moves are made on weak volume, emotivism, and bias, and they're short-lived.

Do you know your intsrument's Historical Volitility sampled per swing over the last 3-6 months, 3-6 years, and within the 26 year business cycle? If not, you should.

In your analysis, detrend your data and outliers; in other words, data both forecasted and deviating from the data not forcasted. 7% weekly moves on news, would be a good example.
Originally posted by ramiegram

...Do you know your instrument's Historical Volatility sampled per swing over the last 3-6 months, 3-6 years, and within the 26 year business cycle? If not, you should...

What figure and calculation do you use to measure volatility for the instruments you trade?
Until recently, squared periodic returns and their numerous manipulations. I like dividing standard deviations from expected returns vs. underwater drawdowns for a long benchmark. EWMA and GARCH are other avenues. After the crash, implieds from where I'm sitting are shied away from for simple algebra. More realistic rates of return are the norm for continuity if not.

Originally posted by day trading

Originally posted by ramiegram

...Do you know your instrument's Historical Volatility sampled per swing over the last 3-6 months, 3-6 years, and within the 26 year business cycle? If not, you should...

What figure and calculation do you use to measure volatility for the instruments you trade?
For the benefit of everyone here can you expand on your answer using the ES as an example and providing worked examples of how you would come up with those figures and how you would use them in your day-to-day trading?
Not to be curt or flippant here, but will you cover premium lost on every subsequent options write?

You see the point.

To be fair there's three weeks of research by buzzwords in the above offering.

Cheers,
Originally posted by day trading

For the benefit of everyone here can you expand on your answer using the ES as an example and providing worked examples of how you would come up with those figures and how you would use them in your day-to-day trading?