Volatility Indexes: VIX (Part Of A Series)

In earlier articles which are part of this series, it has been discussed how there are several volatility indexes besides available to help you in trading. To review the previous articles, you can click on the following links:

Volatility Indexes: Introduction To A Series.
Volatility Indexes: Oil OVX (Part Of A Series).

Red, Orange and Green Lines?

A quick look at the following image will help you remember the correlation between the moving average and the red, orange and green lines.
  To view a larger image, click HERE.

The red is equal to a moving average of 200 which is slow. Green is 50 and fast. Orange is 100 and a medium moving average.

When you pull up the VIX, which is the CBOE’s Volatility Index, and the lines are above the vix it means that the implied volatility is higher for that instrument. If the lines are below the vix then the implied volatility is lower for that instrument.

What does this mean for your trading?

By looking at the how the chart is relating to the VIX, you will be able to know if you should be trading ITM (In The Money) or OTM (Out of The Money). It will tell you whether it is best to trend trade or scalp trade. There may be exceptions, but it will tell you what to expect the majority of the time.

You can watch a short two minute video that explains using the VIX in a little more detail.

View it HERE.

As the other articles have mentioned, there are many Volatility Indexes you can use to aid you in becoming the best trader you can be. Take the time to learn all you can so you can put the pieces of trading together for your benefit.

To further your trading education, visit www.apexinvesting.com.