Simple Nifty Trading System Using VIX Trading Strategy

How Can We Begin VIX Trading?

Not too long ago learn a piece of writing on VIX trading within the December 2012 problem of Traders Guidelines. Can the volatility index (INDIAVIX) be used to foretell the Nifty future? New concepts on vix trading have arisen in technical literature that recommend that combining technical diagnosis with the INDIAVIX may end up in a predictive adaptation so one can beat the buy & cling of the Nifty future. James Kozyra and Camillo Lento examined 9 trading ideas in S&P 500 and located that eight of the 9 produced sure outcomes.

The INDIAVIX is incessantly known as the concern index or worry gauge. It represents the implied volatility within the stock market for the following 30 days. The INDIAVIX is calculated in actual time by way of the NSE and is a weighted mix of possibility costs for the Nifty. The formulation that calculates the index takes present market costs for all out-of-the-cash options for the primary and 2d nearest months.

The usage of the INDIAVIX to forecast
The perfect trading rule in vix trading is a straightforward fifty day transferring average crossover of the INDIAVIX for vix trading. Although no longer examined in Indian situation completely it was once ready to provide 12.7% annual returns over the length from January 1999 via July 2009 in S&P 500. These performances exceed the buy & cling means with the aid of 12.forty nine%, top them to conclude that the VIX can predict the S&P 500. For the length, buy & hang yielded a complete of two.28% or an annualized yield of simply zero.21%.

The find out about in vix trading, then again, wants work to complete it in a trading system for the overall investor, most particularly, the learn about goes lengthy and brief, in response to whether or not the INDIAVIX is above its 50 day shifting average. As well as, brokerage will not be incorporated within the learn about. After operating the numbers thru a simulation, we concluded that shifting average whipsaws should be diminished and fee accounted for in revenue calculations. We didn’t embody quick gross sales as a part of the brand new powerful system. Neatly, you want knowledge from InvestBulls who provide the information of INDIAVIX.

vix trading

Right here come the Amibroker afl code for VIX trading:
function ComeDown( series )
{
IsDown = series < MA( series, 50 ); return Ref( Sum( IsDown , 11 ), -1 ); } function ComeUp( series ) { IsAbove = series > MA( series, 50 );
return Ref( Sum( IsAbove , 11 ), -1 );
}

series = Foreign(“INDIAVIX”, “C” );

Plot( series, “VIX”, colorRed );
Plot( MA( series, 50 ), “MA50”, colorBlue );

Buy = ComeDown( series ) > 10;
Sell = ComeUp( series ) > 10;

SetPositionSize( 50, spsPercentOfEquity );

Suggested reading: Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes (Wiley Trading). In the event you just like the submit share it with the sector the usage of the social share icons beneath.

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Indrajit Mukherjee

Indrajit is a professional blogger and Trading System developer, Amibroker expert, WordPress expert, SEO expert and Stock market analyst. He is studying the stock market since 1995 and is an active trader since 2000. He started the journey of StockManiacs.net on 2008. He follows Indian and world markets as well as the forex market closely.

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