VIX Fear Index

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Information about VIX Fear Index
News & Politics

Published on March 4, 2014

Author: InvestingTips

Source: slideshare.net

Description

http://www.theforexnittygritty.com/forex-strategies/vix-fear-factor

VIX Fear Index

Thus the VIX fear index is not always a fear factor and can be an indicator of better times for the stock market or Forex trading as the same principles apply to volatile currency trading as well as to stock volatility.

Considering how uncertain this situation still is traders will be well advised to keep up their Candlestick charts in order to accurately tap into market sentiment. As fundamentals are quickly discounted by the market traders use Japanese Candlestick charting to anticipate approaching price changes and buy stocks or sell stocks accordingly. Forex traders will watch the state of the US economy for clues as to how Forex trading will develop in coming days, weeks, and months.

VIX Fear Index www.CandlestickForums.com

The so called VIX fear index is in the news as the volume of put contracts on the Chicago Board Options Exchange (CBOE) Volatility Index rose to a level of three puts on each call contract. www.CandlestickForums.com

The CBOE Volatility Index itself is a measure of market expectation of coming price movement of the S&P 500 over the coming 30 days. www.CandlestickForums.com

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It uses a weighted measure of the prices of puts and calls in the S&P index as its base. www.CandlestickForums.com

The costs of buying puts and buying calls go up with expectation of market volatility and down when traders expect a more tranquil market. www.CandlestickForums.com

When the VIX fear index is high it is indicative of a volatile market. www.CandlestickForums.com

However, an extremely high VIX has often been seen before a market rally extending over a year. www.CandlestickForums.com

Thus the VIX fear factor is not always a fear factor and can be an indicator of better times for the stock market. www.CandlestickForums.com

Since 2006 it has been possible to trade options on the VIX itself. www.CandlestickForums.com

Options traders expecting to see the VIX fall are the ones buying puts on the so called fear index itself. www.CandlestickForums.com

Traders can trade the VIX directly but stock traders more commonly use the VIX fear index as a guide in helping predict market trends or a market correction. www.CandlestickForums.com

Traders using Candlestick analysis for technical analysis of stocks can use the so called VIX fear index as an adjunct to understanding and predicting changes in market sentiment. www.CandlestickForums.com

When the VIX fear index peaked recently, traders, expecting a fall from historic highs, bought puts on the index. www.CandlestickForums.com

Those trading the VIX fear index directly can use both fundamental and technical analysis. www.CandlestickForums.com

hose who simply use the so called VIX fear index as a guide will use the expectation of a decline in stock volatility into their calculations for future stock trading. www.CandlestickForums.com

The extreme stock price volatility and index volatility that the market has displayed recently seem to stem largely from concern about the potential economic effects of the European Union not solving its sovereign debt dilemma. www.CandlestickForums.com

Recent pronouncements by German and French leaders seem to have calmed the markets a little to which some credit to the likelihood of decreased market volatility. www.CandlestickForums.com

Considering how uncertain this situation still is traders will be well advised to keep up their Candlestick charts in order to accurately tap into market sentiment. www.CandlestickForums.com

As fundamentals are quickly discounted by the market traders use Japanese Candlestick charting to anticipate approaching price changes and buy stocks or sell stocks accordingly. www.CandlestickForums.com

Remember when using the VIX as a guide that the so called VIX fear index does not differentiate between a high volume of puts on the S&P 500 index which indicates a potentially falling market and a high volume of calls which indicates a potentially rising market. www.CandlestickForums.com

Also remember that calls and puts on the VIX index itself have to do with expectations of higher or lower volatility, not a higher or lower stock market. www.CandlestickForums.com

No matter what the so called VIX fear factor seems to tell us, traders using Candlestick pattern formations as a guide know that market sentiment can always change and that with Candlestick signals as a guide they can profit in both up and down markets. www.CandlestickForums.com

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