The gap between weekly and daily volatility estimates
Posted: Fri Oct 30, 2026 8:16 am
The gap between weekly and daily volatility estimates
Volatility estimates use different horizons. A weekly average range may suggest 60 pips a day. A daily estimate from the last few days may say 40. A scalper working on an hourly range sees something else again.
Using the wrong horizon leads to wrong expectations. Targets sized from weekly data are too ambitious for a quiet day. Stops sized from the last hour are too tight when volatility returns.
A common technique is to compare the current session's range with the recent average at the same time of day. A session running at half the typical range by midday is unlikely to make up the difference.
Adjusting target sizes to the day's realised volatility improves the hit rate.
A middle path is the average range for the same hour of the day over the last twenty sessions. It respects the daily rhythm and adapts quickly. A target sized as a fraction of that hourly figure, say a quarter of it, tends to track conditions better than any fixed pip number.
How does the target size compare with the realised range on the day, and is it adjusted?
Volatility estimates use different horizons. A weekly average range may suggest 60 pips a day. A daily estimate from the last few days may say 40. A scalper working on an hourly range sees something else again.
Using the wrong horizon leads to wrong expectations. Targets sized from weekly data are too ambitious for a quiet day. Stops sized from the last hour are too tight when volatility returns.
A common technique is to compare the current session's range with the recent average at the same time of day. A session running at half the typical range by midday is unlikely to make up the difference.
Adjusting target sizes to the day's realised volatility improves the hit rate.
A middle path is the average range for the same hour of the day over the last twenty sessions. It respects the daily rhythm and adapts quickly. A target sized as a fraction of that hourly figure, say a quarter of it, tends to track conditions better than any fixed pip number.
How does the target size compare with the realised range on the day, and is it adjusted?