Volatility is Much Higher in the Short Term

Something happens. It is followed by price action with big gaps and big moves. The smaller the time horizon, the larger the volatility is in relation to the usual range. I have told people this many times. This is why amateur forex traders go broke in a matter of weeks.
Think about it this way. If something crazy happens overnight on the S&P futures, it might open 20 points up or down. Traders on the 5-minute time frame where the average bar is a single point experience a gap 20X the normal range. Traders on the hourly time frame where the average bar is maybe 4 points experience a gap of 5X the normal range. Swing traders on the daily chart might experience 3X normal volatility. By the time we get into a monthly time frame, the gap disappears.

A different formulation of the question asks how heavy the tails of the financial returns are. The available empirical evidence can be, and has been, interpreted in more than one way. The apparent paradox, which has puzzled many a researcher, is that the tails appear to become less heavy for less frequent (e.g. monthly) returns than for more frequent (e.g. daily) returns, a phenomenon not easily explainable by the standard models. . . . We show that, for financial returns, a natural family of models are those with tempered heavy tails. These models can generate observations that appear heavy tailed for a wide range of aggregation levels before becoming clearly light tailed at even larger aggregation scales.

Those trading small(er) time frames need to increase the size of the stops to accommodate an explosion of volatility, which also makes it necessary to reduce position in extremis. Or go belly up.
As an investor, then, time is your friend. The day-to-day action, no matter how exciting, work against the trader, but for the investor, it’s not really a problem. (Nothing displayed below?)
[pdf width=”100%” height=”1100px”]https://s3.amazonaws.com/2013-wealthcop-PDF/Variance.2010-grabchak.pdf[/pdf]