I traded forex back in 2009 to 2010. Additionally, I did some chart studies from 2006 too 2008 and I have noticed the following:
From 2006 too 2011, there have been in currencies such as the EUR/USD and the GPD/USD that offered easy intraday juicy trends at least twice a week. for instance 250 pips from 9 AM to 12 PM.
In other words for forex such as GPD/USD or EUR/USD, the markets had plenty of 100 pip moves within short three hour sessions. They were also technically easy to trade. This happened two years before the 2008 GFC and two years after.
Today:
Forex products such as Eur/usd and gpd/usd have SIGNIFICANTLY smaller ranges Even a 70 pip move during the 9 AM EST to 12 PM EST session is a rarity.
Additionally, the charts look ugly and choppy and are much more difficult to trade technically.
So, my questions are the following:
1.How did Forex go from being the land of juicy to 150 pip two hour moves to a weak range chop shop?
I think it comes down to volatility contraction and the domination of HFT bots/algos.
Can you post some charts from 2006-07?
Interesting, Government intervention calms volatility. FX (and other markets) are naturally trending towards an equity collapse/risk-off/high volatility environment. Central Bankers, armed with QE, step in routinely, and stave off the inevitable collapse. If you pull a chart of the historical VIX, you can pinpoint spikes and sell-offs where the market wanted to dump, followed quickly by bureaucrats who propped, followed by a VIX sell-off.
While markets are ever-changing, there is a lot of exagerration in this.
I traded in 2006, and the ADR was down to 50 pips at times (look at charts around October of that year). It was worse than it is now. That's when "grid trading" took off, as well as other counter-trend strategies. The early trend-following and breakout strategies that drew many into FX circa 2003-2004 died a painful death.
Vol went on to peak in 2008 during the crisis, and has been all over the place since then.
If there were really multi-year periods where 250-pip moves occurred on a daily basis, we'd have a lot more FX millionaires/billionaires walking around.
I think it comes down to volatility contraction and the domination of HFT bots/algos.
Can you post some charts from 2006-07?
Interesting, Government intervention calms volatility. FX (and other markets) are naturally trending towards an equity collapse/risk-off/high volatility environment. Central Bankers, armed with QE, step in routinely, and stave off the inevitable collapse. If you pull a chart of the historical VIX, you can pinpoint spikes and sell-offs where the market wanted to dump, followed quickly by bureaucrats who propped, followed by a VIX sell-off.
Of course it will, but it will be pandemonium. I think of it more akin to "instant re-pricing", not the sort of tradeable volatility that we saw a decade or so ago.
Since the bureaucrats have essentially "become the markets". i.e. whatever rumor they want to release at any times to move the markets...well it takes away natural liquidity (of course HFT has done a bang up job of that as well). So now the markets essentially subsist purely off of whatever "political fix" can be had for tomorrow or next week. There is no "long term plan".
