Intraday volatility
How much does a market swing within the week, and why can a small weekly close hide those swings?
In plain words
Intraday volatility is the size of price swings that happen inside a period, before the period closes. A market can travel a wide path up and down and still finish near where it started, so the net return is not a measure of the swings.
Why it matters
Risk is taken at every price touched during the week, not only at the close. Wide intraday swings can hit stop levels, force liquidations, and make a position feel far larger than the weekly return suggests, so position sizing based on the net move alone understates the risk actually faced.
In a real week: BTC, week of 18 March 2024
In the week of 18 March 2024, BTC fell only 1.73% from open to close, but traded between a high of 68956.0 on Monday at 05:00 UTC and a low of 60775.0 on Wednesday at 05:00 UTC, a range of 13.46%. Realised volatility was 71.8% a year, the largest 1-hour move was 2.09% on Wednesday at 00:00 UTC, the worst day was 19 March at -8.39% and the best was 20 March at 9.53%. A weekly return of -1.73% concealed a 13.46% round trip.
A common mistake
Reading a small weekly return as a quiet week. The close shows only the endpoints; the path between them can be far wider, and that path is where stops and liquidations are triggered.