Having the water level a few inches low is normal, if you don't have an overflow tank.The radiator starts full then when the thing heats up the fluid expands and some dumps out the overflow. When it cools the fluid contracts and the level is low. While the engine and hot the level should be near the top of the rad. What you are seeing may be air pockets in the system expanding and pushing the fluid level up, then as the air is expelled the fluid level drops once again.Or it could be the thermostat shutting off flow, the coolant in the rad cools and contracts until the thermostat opens again and the hot fluid is pumped into the rad.

Like the guys said, get an overflow tank and a proper rad cap for an overflow tank system. When the fluid expands it will go into the tank when it cools it will go back into the rad. Having a rad 100% full is better for cooling than having a rad with air pockets in it.
imo