volatility index 75 trading strategies pdf

What is the volatility 75 index or VIX?

The volatility of 75 indexes is usually abbreviated as VIX and indicates the volatility of one of the most closely monitored stock indices, the S&P 500. VIX is an indicator of the market's fear, and when it exceeds 30, the market is in fear mode. The level of fear is directly proportional to the VIX value. If the VIX is less than 30, it indicates complacency. The VIX is ideal for traders who wish to profit from volatile markets or hedge in the short term.

Volatility Index or VIX or volatility 75 is a special CBOE (Chicago Board Options Exchange) index created to measure the volatility of the S&P500 index. VIX Index projects the probable range of movement in the U.S. equity markets, above and below their current level, in the immediate future, usually next 30 days. This volatility index is often known as the "fear index."

What is the VIX index today?

See below live VIX chart and VIX index today value:

Vix index is calculated and measured by CBOE in real-time. This can offer the sentiment of the investors and measure all related risk factors of the market. Experienced marketers and analysts calculate the market's risk factors and measure the stress and fear before making any investments or taking any investment ideas.

VIX can measure and calculate the level of implied volatility. There is a wide range of options that you can get. This indicator can help the investors by reflecting the best predictions of near-term market situations. In general, the Volatility Index starts to rise during the period of financial stress. It is the best market's prediction of near-term volatility.

How to get volatility 75 indexes on MT4?
VIX indicator on MT4 chart

VIX indicator Download

Please download the free VIX indicator for MT4 (VIX mql4)

Download VIX indicator MT5

VOLATILITY INDEX AND BEHAVIOUR OF THE STOCK MARKET

Actually, this is the historical relationship between the behavior of the stock market and the Volatility Index. The high Volatility Index reflects the fear of investors. It is repeated in the bear and bull cycle. You can notice that during the time of market turmoil, the Volatility Index will spike high and widely reflect the panic and huge demand for OEX puts and further reduces in a stock portfolio. You can notice less fear during the bullish time, and you do not need portfolio managers to buy puts.

How VIX works?

The VIX usually has a negative correlation with the S&P 500. When the VIX rising, that means that there are significant price fluctuations on the S&P 500 (SPX). Usually, when VIX rising SPX falling in price due to increasing investor fears, and the opposite, when VIX declines, SPX rising. This negative correlation shows how the VIX index works because investors can use the VIX to measure the fear level, risk, and stress in the trading market.

How to trade volatility 75 index on MT4?

In MT4, traders can use the Volatility 75 Index to measure future volatility to better-set stop loss and target price level. This indicator can help traders to decide when to close the trade. However, this indicator can be very dangerous to use alone in trading decisions if you do not use other triggers, such as price levels, divergence, oscillators, etc. During the volatility, periods check your deviation for the quoted price because of the "off quotes" MT4 error.

BEST TIME TO TRADE VOLATILITY INDEX 75:

For consistent profit, V 75 traders should wait for the perfect time to trade VOLATILITY INDEX 75. But many traders make their entry into the trade market at the wrong time. Their timing is wrong. So, this leads to the loss of their account. So, the right time and the right trading skill are significant and essential to profit and reduce loss. It also needs a sorted frame of mind and patience. Professional traders win the profit most of the time by following this tactic. Successful traders do not enter the market all the time. They judge and do good research about the market before making their entry.

The good VOLATILITY INDEX 75 trades are generally entered at the point of breakouts and reversal time. The candlestick patterns or methods will help you to enter a profitable and successful market. Apart from this, the price of V75 is related to the USD Index.

Best time to trade volatility indices
The best time to trade volatility indices is one hour after the London market opens and one hour after the US market opens. The biggest liquidity is in that period. However, trading one hour after open helps traders avoid huge spikes and enough time to identify a daily trend. The best time to trade indices is when the US trading session overlaps the London session (12.00 GMT – 16.00 GMT).

THE TRADITIONAL MEASURE OF VOLATILITY:

Standard deviation is one of the traditional and typical statistics to measure volatility. It is defined as the square root of the average variance of the whole data. The statistic is simple to calculate, but the interpretation's assumption is very tricky and complex. It raises concerns about its accurate results.

So, the standard deviation is an accurate method of calculating the risk factors of the market. But the investment performance data is not distributed well. There are some reasons behind that:

* The investment's performance is generally skewed, resulting in the return distributions being asymmetrical. So, due to this fluctuation, the investors need to experience high and low performance.
* The investment performance reveals a huge number of negative and positive periods of overall performance.

A SIMPLE WAY TO MEASURE VOLATILITY:

Apart from the standard deviation, there is a much simpler and easier way to measure volatility. Through the process of the historical method, you can examine and calculate the risk factors. So, the investors require to graph the historical performance of the investment. They follow a chart known as a histogram. Through this particular chart, they calculate and measure the volatility of the market.

In this chart, the proportion of observations fall in place within the variety of category ranges. This chart will allow the investors to determine and calculate the percentage of the time.

THE DIFFERENCE BETWEEN IMPLIED VOLATILITY AND HISTORICAL VOLATILITY:

Implied volatility is known as projected volatility. It is one of the important and necessary metrics for traders. It allows them to consider how the volatility of the market is going further in the future. This is one of the best ways to calculate the probability of the market. Through this method, you can forecast how the market will move shortly. As it is implied, the traders and marketers cannot use their past performances.

On the other hand, the Historical Volatility gauges the fluctuation of the market and underlying security facts. So, as you can see, it is not at all a forward-looking method.

HOW TO TRADE THE VOLATILITY INDEX?

In this way, you can use the volatility as a tradable asset. CBOE launched it in the year 2004. The Volatility of Index-linked instruments helps to get proper exposure. But you cannot purchase VIX directly. Instead of that, you need to take a position in the Volatility Index through so many varieties of exchange products. The traders get the chance to make their bets through the high beta stocks in accurate proportions to correct the price of their trade options.

Apart from this, sentiment plays an important and necessary role in making the stock market's decision. So, it is a good idea to take a glance at the Volatility Index. But before making any decision, you will have to know that success in the market will not depend on the prediction of the future. So, you need to take help from an experienced and practical person in this regard. The volatile period is very much beneficial to plan your financial success. So, you need to turn the volatility of the market in favor of you.

Which broker has a volatility index for trading?

So, which broker trades volatility 75 indexes? Today, all major forex brokers offer VIX. List of brokers that trade volatility index

Hotforex broker that has volatility 75 indexes. Hotforex is regulated and one of the biggest world forex brokers. For Hotforex clients – VIX can be used as an indicator.

Hotforex is one of the top volatility 75 index brokers in South Africa as well. Hotforex has separated regulated branches in South Africa.

Avatrade VIX index trading

Avatrade is a global online broker offering CFDs, Forex, Social trading, and spread betting. It was founded in 2006 and is located in the British Virgin Islands. A demo account is available, and a minimum deposit of $250 is required for trading. Traders can use the Android, iOS app, MT4 forex platform. It is suitable for beginners also and has more than 80 currency pairs, 250+ instruments for trading. It allows hedging, scalping. Micro, Islamic and standard accounts are some of the account options available. English, Greek, French, German, and Italian are some of the languages available.

IC Markets

IC Markets is one of the brokers that offer VIX index trading. It allows hedging, STP, low deposit, an account with negative balance protection, and a guarantee for stop loss. Different account types include demo, micro, standard, STP, and managed account. English, Arabic, Chinese, Spanish, Polish, and German are languages for the platform. The customer support is highly rated.

Pepperstone

Pepperstone was established in Melbourne in 2010. It processed more than $10 billion in trades on an average in 2019 and provided third-party trading, forex, CFD trading, excellent customer service, and competitive pricing. It is authorized by the Australian Securities and Investment Commission(ASIC) and the Financial Conduct Authority(FCA). It offers a standard account where the spreads include the commission charged. It also offers a Razor account that can be used with Ctrader or MetaTrader (MT4) platforms, with commissions being charged.

Pepperstone has a program for active traders that allows them to get discounts based on activity level. 200 lots are required for the lowest tier, and a rebate of $1 is offered for standard lots. It uses the Edge infrastructure to improve the rate of execution. It offers MT4, MT5 desktop, web, multi-terminal, Ctrader, desktop, web, Cargo. It offers Mirrortrader, RoboX, Zulutrade, myFxbook copy trading. Traders can access Autochartist for trading signals and automated recognition of patterns. Trader tools like sentiment indicators, market analysis, in-house commentary are available. Mobile trading is permitted.

Saxo Bank

Saxo Bank is ideal for traders who can afford to deposit USD 10,000 initially since the pricing is competitive. For UK traders, the minimum deposit is GBP500. It offers multiple trading platforms, high-quality research, good customer services, and more than 40000 instruments for trading.

Saxo Bank operates a bank and is considered low risk. It is not traded publicly and is authorized by six tier-one regulators who are highly trusted. It offers classic, platinum, and VIP accounts with a minimum deposit of USD 10,000, USD 200,000, and USD 1,000,000. The SaxotraderGO is a web-based feature-rich trading platform with about 20 drawing tools, 55 indicators, including the auto chartist trade signals. The SaxoTraderPRO is an enhanced version with enhanced features. It has excellent in-house research.

IG Group

IG has a wide range of 17000+ tradeable instruments, excellent tools, and rates. It operates a regulated bank, is publicly traded, and low risk. Six high trust regulators authorize it. For high-volume traders who are considered professionals, IG charges lower commissions with Forex Direct, which uses interbank liquidity. In addition to its own web-based platform, it also offers other platforms like MT4. A mobile app is also available. Pro real-time charts and alerts on specific indicators can also be provided. Research from Autochartist is also available.

XTB

XTB is another online global broker offering Cryptocurrency trading, CFDs, and Forex. It was founded in 2002 and had a head office in Poland. The reputed broker allows it to trade in more than 50 currency pairs, over 1500 instruments. The trading platforms are Xstation5 and MT4 for forex trading. Mobile apps are also available. English, Czech, Chinese, French, Spanish, Italian, Portuguese, Polish, Romanian, Turkish, and Slovenian are some of the languages available.

Conclusion

Though multiple trading strategies are using the VIX, the simplest strategy involves monitoring the VIX, and when it reaches very high levels, traders can short the VIX. While using the volatility for trading is a good strategy when markets are unstable, traders should be aware that the volatility will remain high only for a short period of time

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