Daytrading  |  DEC 2007

Forecasting Futures Movement by In Gyu Koh and Sung Soon Lee

Forecasting Futures Movement by In Gyu Koh and Sung Soon Lee A Daytrading Method Second To None Forecasting Futures Movement Is it possible to chase two rabbits at once? This intraday technique combines direction of price movement and timing of your entries and exits. IN trading, two variables to consider are direction of price movement and the timing of your entries and exits. Most of the time you can’t catch them both at the same time — it’s usually one or the other. In this article we show you how you can. We will discuss when and in which direction futures prices will move during an intraday period. Empirically, we have found that when the 90-minute historical volatility goes below the 80% level of the 180- minute historical volatility, price tends to change drastically. At that point, the price is apt to increase if the 75-minute moving average of implied volatility is higher than the 165- minute moving average. HISTORICAL VOLATILITY Historical volatility (HV) is a powerful barometer of the drastic change of the underlying asset. If the value of HV is below normal, rapid changes can happen within a minute. However, historical volatility by itself does not tell us anything about the direction of the underlying asset’s movement. Though many indicators claim to show direction and timing, they are not sufficient by themselves. This is because one indicator provides only one clue. You need at least two indicators to provide two independent clues. Here we will show you how you can get information for two clues using two indicators — historical volatility (HV) and implied volatility (IV).

by In Gyu Koh and Sung Soon Lee