A question on Nifty volatility

Hello,

I am backtesting some strategies, but before I do that can someone tell me -

  1. If movement in Nifty always like this ? Right now, a 100 or even a 200 point range intraday is normal, does nifty always behave like this ?

  2. If no, are there any patterns ? Like it becomes volatile for a couple of months and then again become silent ?

  3. Does it become so silent that trend following strategies get difficult to implement ?

@nithin @ShubhS9 @siva

No, Nifty doesn’t always behave like this, this volatility and huge swing in prices is because of Coronavirus. As historical reference, you can take look at 2008 - 2009 chart when whole world was in grip of Financial Crisis.

As I said above, this volatility is because of Coronavirus. Also, if there is any news domestically or globally then as well Nifty can be volatile. Also during Union Budget, General Election, RBI Monetary Policy Meeting. You can read this chapter on Varsity for more.

There is general conception that markets are trending only 30% of the time while are range bound 70% of the time.

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Thanks @ShubhS9 for such detailed replies.

How does one interpret Indiavix when backtesting strategies which work in volatile markets ? Like if Indiavix is above so and so, intraday movement is good and vice versa. (Excluding the current volatility and the 2008-09 patch)

Market trends around 35% of the time only. Rest of the time it could be flat, volatile, here or there. But trend following strategies generally does well to capture a good part of the trending movements to make significant enough returns on trading capital. While there are N number of different ways to make money from the market, simple algos (trend following or otherwise) tend to work well, tend to be more reliable over a longer period of time. In trading, its about building a strategy that one is comfortable with and then sticking to it as if your life depends on it.