Wednesday, July 26, 2006

Riding The VIX

I use the VIX to help me pull the trigger on trades. The method is simple. I keep a chart of the VIX on a 5-minute basis on my screen at all times. If it prints a topping formation it tells me that I should be able to either take a long or close a short. If it prints a bottoming formation it tells me to either close any short term longs or to get short.

The figure shows this effect. The VIX is on a 5-minute basis. That permits me to be able to observe it over a 15-minute period to ensure that the signal is accurate. The object long is on a 15-minute basis. This one worked all day long even though the VIX flattened out in the mid-day period.

As with any trading idea you might see here or anywhere else it pays to investigate and evaluate on your own. Don't take my word for this - try it yourself and see if it fits your trading style.

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