Volatility after news does not always die down
Posted: Mon Nov 02, 2026 9:11 pm
Volatility after news does not always die down
The folk wisdom says that after a big release, volatility fades and the market goes quiet. Sometimes it does. Other times the volatility just changes shape.
After a major surprise, markets often show elevated ranges for hours, even days. Spreads normalise, but the swings stay bigger than usual, and levels that held before get broken more easily.
Scalpers who return to their normal sizing and stops in this environment find that stops get hit more often and targets are reached faster. The same settings behave differently in a different volatility regime.
Measuring recent average range and comparing it with the long term average gives a sense of where the market is. If today's range is far above normal, the strategy should adapt, with wider stops and smaller size, or accept that results will be bumpier.
It can also go the other way. After a long run of anticipation, a boring outcome can produce a collapse in volatility, with ranges well below average for days.
One way to see it: plot the average five minute range for the three days after a major surprise against the average for the prior month. The ratio often sits well above one for a day or two before decaying.
How does the average range after a major event compare with the usual range for the pair?
The folk wisdom says that after a big release, volatility fades and the market goes quiet. Sometimes it does. Other times the volatility just changes shape.
After a major surprise, markets often show elevated ranges for hours, even days. Spreads normalise, but the swings stay bigger than usual, and levels that held before get broken more easily.
Scalpers who return to their normal sizing and stops in this environment find that stops get hit more often and targets are reached faster. The same settings behave differently in a different volatility regime.
Measuring recent average range and comparing it with the long term average gives a sense of where the market is. If today's range is far above normal, the strategy should adapt, with wider stops and smaller size, or accept that results will be bumpier.
It can also go the other way. After a long run of anticipation, a boring outcome can produce a collapse in volatility, with ranges well below average for days.
One way to see it: plot the average five minute range for the three days after a major surprise against the average for the prior month. The ratio often sits well above one for a day or two before decaying.
How does the average range after a major event compare with the usual range for the pair?