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How i use VIX ?


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#1 NAV

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Posted 02 March 2018 - 12:28 AM

No i don't use it as an indicator to time markets. It's ability as a leading indicator is highly overrated. There's nothing i can't glean from price, that i can with VIX. Hell no, i don't trade any VIX related products. The trading world is filled with dead bodies of folks trading these dangerous VIX products. 
 
To me, VIX is a good gauge as to what to do with markets (IMHO):
 
VIX below 13 - Low volatile uptrend. Great for passive investing and positional traders on long side. Swing trading both directions won't work. However swing trading only the long side will work well. Day traders get steamrolled. 2017 was a great example of this type of environment.
 
VIX 13 - 20 - Medium volatile two-way trading market. Swing traders rock in this enviroment. Positional traders make nothing in these type of markets. Deep drawdowns for passive investors, but nothing alarming. Day trading is not bad in this kind of markets. These are typical bull market correction enviroments i.e IT declines in a bull market. There are many examples of this during 2003, 2004 and 2005 and in the recent (2009-2017) bull market corrections. 
 
VIX 20-30 - High volatile bear market. Positional trading is tough as the drawdowns can be huge and positional systems will be slow to respond to abrupt turns in the market. Swing trading works, but stop sizes are big and retracements can be deep. Day trading truly rocks in this environment! (Gotta get down to 1-min charts and be glued to the system). Passive investors start getting nightmares in this environment. 2008 and Feb,2018 declines are good examples of this type of environment. 
 
VIX 30 and above - Hyper volatile bear market. 2008 fall is a good example of this. Passive investing, Positional, Swing, Daytrading - everything is tough in this environment. Gap risks are enormous. Stop sizes are huge. However positional only on the short side can still work in this environment, if you have the stomach for deep retracements. Cash is a good option in this environment. Passive investors get wiped out !

Edited by NAV, 02 March 2018 - 12:38 AM.

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#2 MDurkin

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Posted 02 March 2018 - 04:09 AM

Very useful Nav Thanks.



#3 MaryAM

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Posted 02 March 2018 - 11:12 AM

I use VIX on my chest and throat when I have bronchitis.  Sorry I couldn't help myself.  



#4 diogenes227

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Posted 02 March 2018 - 01:49 PM

 

No i don't use it as an indicator to time markets. It's ability as a leading indicator is highly overrated. There's nothing i can't glean from price, that i can with VIX. Hell no, i don't trade any VIX related products. The trading world is filled with dead bodies of folks trading these dangerous VIX products. 
 
To me, VIX is a good gauge as to what to do with markets (IMHO):
 
VIX below 13 - Low volatile uptrend. Great for passive investing and positional traders on long side. Swing trading both directions won't work. However swing trading only the long side will work well. Day traders get steamrolled. 2017 was a great example of this type of environment.
 
VIX 13 - 20 - Medium volatile two-way trading market. Swing traders rock in this enviroment. Positional traders make nothing in these type of markets. Deep drawdowns for passive investors, but nothing alarming. Day trading is not bad in this kind of markets. These are typical bull market correction enviroments i.e IT declines in a bull market. There are many examples of this during 2003, 2004 and 2005 and in the recent (2009-2017) bull market corrections. 
 
VIX 20-30 - High volatile bear market. Positional trading is tough as the drawdowns can be huge and positional systems will be slow to respond to abrupt turns in the market. Swing trading works, but stop sizes are big and retracements can be deep. Day trading truly rocks in this environment! (Gotta get down to 1-min charts and be glued to the system). Passive investors start getting nightmares in this environment. 2008 and Feb,2018 declines are good examples of this type of environment. 
 
VIX 30 and above - Hyper volatile bear market. 2008 fall is a good example of this. Passive investing, Positional, Swing, Daytrading - everything is tough in this environment. Gap risks are enormous. Stop sizes are huge. However positional only on the short side can still work in this environment, if you have the stomach for deep retracements. Cash is a good option in this environment. Passive investors get wiped out !

 

 

Great stuff.  A simple, clear context.

 

Your numbers are close to mine:

 

Below 15, a bull.

 

Between 15 and 25, swing both ways, but most likely a bull market correction in progress.

 

Above 25, a bear.

 

Additional notes:

 

Below 10, the bull is not dead but will begin to stagger soon.

 

Above 40 the bear will rage but die someday soon.

 

Good luck and good trading.

 


"If you've heard this story before, don't stop me because I'd like to hear it again," Groucho Marx (on market history?).

“I've learned in options trading simple is best and the obvious is often the most elusive to recognize.”

 

"The god of trading rewards persistence, experience and discipline, and absolutely nothing else."


#5 viccarter

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Posted 02 March 2018 - 03:19 PM

Very good post.  Newbies and vets alike should bookmark for reference and to think about when you get ready to take a position.  That post that you idid a few years ago on overcoming fears of a gap down when swing trading long in an uptrend was probably one of your most influential, IMO though.


Edited by viccarter, 02 March 2018 - 03:19 PM.