VIX - Ride the profits

Hello to all FF readers,

Let me introduce myself first before starting with the system. I am a trader from India but living in the middle east and I have been trading for about 5 years with average success (from age 15). I developed interest in the markets when I saw my father losing his money and he kept telling me its no use trading...it is a money taking machine. Like any other 13 year old I said no dad, its not so hard. I started researching day and night and started understanding all the basic terms of trading, what do indicators represent...etc etc. Did that for about a year and a half and started demo. There were no good demo accounts back then so I used to write my trades in an excel sheet. Started trading live with a small capital of $500 and blew it up 3 times before managing to get it back up in three years.

If you have any criticism for this thread or system then please keep it to yourself. If you find something wrong with the system and have a suggestion or solution then you are free to post.

Now lets begin with a system I follow.

First and foremost thing to do is to judge the trend direction. I have been trading Gold ONLY in all these years so I will talk about Gold ONLY. Gold is clearly in a multi-year bull trend and if you pick the bottom out right then you are going to make money (if the trend continues). You may try using this indicator on various currency pairs but I personally have not tried it yet.

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Picking out bottom is almost impossible unless you are very lucky. Even if you catch the bottom with your smartness, the hard part is hanging on to the trade for the best period.

I use an indicator named SOHO_VIX which was coded by a poster in another forum, so all my credits to that person. The only thing I developed was the way to use it!

Indicator setting default is 22 but I set it to 1.

Here is the strategy:

When the Gold market starts falling sharply and it closes near the lows or has been moving lower consistently...AND

1. VIX is under -2.00
2. VIX is falling sharply

then you wait for the next days close and have a look at the VIX. If VIX retraces most of the previous downside (in the indicator panel itself and not the price) then you enter a buy trade at the close and keep your stop under the previous candles low (the candle when VIX was moving down sharply).

If you get stopped out then ... I will explain this in the next few posts. If you do not get stopped out then ride the trend on the upside and use indicators which show you the strength of the trend.

In the chart below, you can see 2 stop outs of $10 (100 pips) each. The stops total up to a loss of 20$ (200) pips, which is not that bad if you think about it. If you are a conservative trader or a short term trade then you can use 1:1 RR and you will not be stopped out very often. However, if you want to ride the main trend then you need to be able to handle the stop outs.

The third trade is really the winner out there which had a large stop to it but it caught a move of 200$ (2000 pips), depending if you had closed the trade there.

This indicator works well for people who follow the saying ' Cut your losses short and ride your profits'.

This system has many other aspects, about which I will write very soon. Time is the problem for me right now as I am doing CFA. So please spare me if I am not able to reply to anyone.

Also, I have not tried trading with the system and I would be glad if you guys can help me with the research on this. I had a look on other TF's and it works fine once I explain the other aspects.

Have a nice weekend all!

Does the 1 setting apply for XAG as well?

Not sure about that but I will check out the settings soon. I guess if we play around with settings for each pair then there might be a good break through here. Again, time is an issue for me but I will try my best to complete the posting here.

Ok I will continue now since I just have one more reading left for the night.

Do not trade the reversal if it has happened on the sunday candle (if you have one in your platform). It is almost always a fake reversal.

Another thing to note is that if you get stopped out for your entry and the price continues dropping, you either:

1. Wait for the next signal
2. Wait for the price to get back ABOVE your entry point

For the first case, it is the same thing - entry on vix reversal. For the second case, the price may drop further after hitting your stop loss on the first entry and you may not get a vix signal also. In such cases, you enter the market again with the same stop loss once the price CROSSES ABOVE the first entry price.

It may sound complicated, but this is all I have discovered until now.

If its hard to understand then do let me know guys or if someone can make an EA out of this with something like an arrow with stop loss line then it would be great!

I like the title of your thread, and I like that you at least mentioned the VIX. I also like to ride profits.

It is easier to predict instances of volatility than it is to predict the rise/fall of a major currency pair. (Hell, they are scheduled.) And if you are well capitalized, there are easy ways to ride the pofits trading options on the VIX.

But I'm not going to tell what those are, because I'm a lazy mofo.

Good luck with your trading: I wish I had started at 13, I could have bought India by now. Ride on, lazy mofo.

Here is a SHORT TERM 1 HOUR chart. The profit factor will be less because it is short term and it may be harder to read charts.


Trade number 1:

No trade because when VIX fell sharply, the candle stick had large wicks on the both sides and the body was in middle (the candle before the buy arrow).

Trade number 2:

Long trade was taken (blue arrow) as VIX had reversed from under -2.00. A person using RR 1:1 would have profited from this trade though. Anyways, it ended up in a loss of $15.35.

Trade number 3:

Long trade was taken at the same point of trade number 2. This rule was mentioned earlier. The stop loss was the swing low at that time and it provided a profitable 1:2RR trade.

Trade number 4:

Long trade was entered with a minor stop of $5. This trade had a RR of 1:8.

These are floating profits. It is upto your judgement to exit as indicators do not tell you to do everything. I would suggest trailing stop losses or having a fix RR ratio set in your mind or something.

1:1 works best as then this system has 90% winning trades. However, the stop losses vary in each case which may change the results.

For example:

The 10% losing trades have a stop loss of $20 (200 pips) and then 90% trades result in profit of $5 (50 pips).

So if there were hundred trades then..

( 90 x $5 - 10 x $20)

you would be + $250.

Hi. Thanks for the words. Thought for a moment I did the wrong thing posting the thread in this section lol.

He cannot reply as he is on ignore. Anyways, I was thinking why VIX peak and bottoms are so important for the gold market. I came up with some thought that it is probably reflecting the market sentiment shifts between fear and confidence.

When there is too much fear, VIX continues to drop and reverses when price stalls. Again, it all depends on how much the fear drop is reversed in VIX.

Do you have any fundamental idea about VIX? I read in my CFA chapters that VIX is a measure of volatility in the stock markets and also measure of fear.

Also, I was checking out the pair EURUSD and found something interesting. In that pair, I see that whenever VIX goes up and reverses sharply...it results in a potential top in EURUSD. Complete opposite of Gold. Looks like it shows you the trend?

Time to get my research weekend going. Will come back with potentially something interesting.

Hi Tilf,

Many thanks for your thread

Yes the Wvf Williams Vix Fix is a good indicator.

It is Larry Williams well know indicator.

You can googled Larry Williams vix fix.

for example :

http://www.tradingtheodds.com/2010/0...80%99-vix-fix/


William’s original formula:

WVF = [Highest (Close,22) - Low) / (Highest(Close,22)] * 100

I have just returned the line : now the line is in the same way than price.

with this formula :

WVF = [Highest (Close,22) - Low) / (Highest(Close,22)] * -100

It is more easy to take a decision.

We can use this indicator with all support.

22 periods is for daily , for hourly 24 periods is better.

Regards

Hey sohocool,

Thanks for this upload! I was wondering if using 22 period setting is better compared to 1 period. Will do some research for sure and if possible you could upload the fixed indicator (in line with price).

This weekend I will be formulating my money management strategies as well. It is something like the loss is fixed at 1%. So losing 50 pips is same as losing 200 pips in monetary terms. This would increase the probability of one's account ending in positive even if you are right 51% and wrong 49% of your trades!

added: I have further noticed that when you have V shaped reversals on the VIX it is some kind of an indication showing you the trend. If the V's are for bottoms then trend is up and V's are inverted for tops then trend is down.

Hi Tilf,

I just see a mistake inside MT4 indicateur ,i have modified.

Also ,we can change low (default setting PRICE) =3

-by close PRICE = 0
-by high PRICE = 2

WVF = [Highest (Close,22) - Low) / (Highest(Close,22)] * -100


I work on a special Donchian channel indicator ,for WVF .

We can add stochastic setting close/close 22/1/1.

WVF and Stochastic are same family indicators.

Regards

Price setting posibility :

PRICE_CLOSE 0 Close price.
PRICE_OPEN 1 Open price.
PRICE_HIGH 2 High price.
PRICE_LOW 3 Low price.
PRICE_MEDIAN 4 Median price, (high+low)/2.
PRICE_TYPICAL 5 Typical price, (high+low+close)/3.
PRICE_WEIGHTED 6 Weighted close price, (high+low+close+close)/4.

Thanks soho for the upload.

Taking the trade in demo account according to the indicator. I was away so I missed out on the entry but I have set the limits, just in case the price gets back there.

Risking 1% of the account for a 1% gain. Since the stop loss is large I will have to trade 0.1 lot on this.

Seems like trade is going good enough thus far. Approaching supply zone at the moment and may look to give an early exit for 0.9%-1% gain.

Ok im out here for $56.8 gain on $5000 or 1.14% gain. Will wait for the next vix reversal.

Missed out on some good EurUsd trade as I cannot watch markets for short term trades. No longer term trades right now.

Short term pattern developed in US30 but I missed out on the entry as usual. The TP would have been hit had I entered (illustrated in the chart with temporary limit but not going to trade this as TP has been hit).

Entry was after the small bull candle that closed after that huge down swing.

How is it going with this method, did you make any pips?

Hi Dinskii,

It is the Kijun_Channel indicator .

Regards.