For the last couple of weeks, we have seen a correlation between the $VIX (CBOE Market Volatility Index) and the US stock market. We have noticed that the $VIX is ranging between 21.22 and 15.84/13.91. We have been posting on Twitter these levels for the last couple of months now.
When the $VIX reaches the resistance, we go long in the US stock market and exit our short option positions (or tighten our stops). When the $VIX reaches the support, we go short in the US Stock market and exit our long positions. The trader does have an option when the resistance/support is reached to tighten their stops to protect their profits instead of exiting the trades. Here is the last twitter post from Feb 12.
Today, we are very close to the major support at 13.91. There is a possibility of breaking this support so we will tighten our stops on our bullish positions and we will now start to look for bearish positions in the US stock market. Here is the current chart for the $VIX:
2015 is a trader’s year. Volatility is here and you have to “steer” through it and not to give up your profits. The worst scenario for a trader is to go “round trip” where you were profitable in a trade and then had to give it back!
If you would like to learn how to trade like an institutional trader or learn more about our multi-timeframe email alerts, go to www.ichimokutrade.com or email us at firstname.lastname@example.org
EDUCATIONAL USE. Commodity Futures Trading Commission, Forex, Futures, Equity and Options Trading has large potential rewards, but also has large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any trading system or methodology is not necessarily indicative of future results. All information provided on the Blog is for educational purpose.