Imagine the market affected by two relatively independent vectors. One vector describes directionality: the "trendiness" of the market. The other vector describes volatility: the degree to which markets vary around a central price.
The first vector describes the degree to which market participants are reassessing value in the auction marketplace.
The second vector is closely connected to volume and reflects who is currently active in the marketplace.
Both vectors are distributed in a non-stationary way through the trading day. That is, measures of trendiness and volatility exhibit different means and standard deviations through the day.
Early identification of when the vectors shift their means and standard deviations is important in recognizing the beginning and ending of trading ranges and market trends.
Many trading problems occur because traders trade the vectors as if they are stationary: they automatically assume that past levels of direction and volatility will be accurate estimates of future direction and volatility.
In other words, markets change their behavior faster than people can change their minds.
And that is why intraday trading is so difficult.
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