What is the VIX Index?

The VIX index was built by CBOE (Chicago Board Options Exchange) based on the options index of the S&P 500. From there the VIX index is calculated and it measures the expected volatility of the next 30 days.

VIX is one of the most amazing Market Sentiment metrics for Traders and Investors today.

How to trade with VIX indices

To learn how to trade with VIX, let's take a look at how the market responds to Fear. As the investors Fear, the more they will find safe investment channels such as Gold, US government bonds, low-interest currencies such as JPY or CHF and they will avoid risky channels such as stocks, real estate, high-interest-rate currencies. The direction of investment will be reversed if they run out of Fear. When VIX increases, fear increases, decrease VIX indicates decreased fear. Looking at VIX, you will see whether the market is Afraid or not Afraid to get your hands right.

Products that are most directly affected by VIX are US stocks, especially general market indices such as the S&P 500, DowJones, Nasdaq. For every VIX increase, these comrades will die, because when the investors are afraid, they will immediately flee the stock market. At this point, gold or bonds will increase in price.

It is possible to trade VIX with US stocks through a divergence - divergence - as follows:

  • VIX increases and S&P 500 increases => SP 500 may decrease.
  • VIX increases and S&P 500 decreases => the downtrend of the S&P 500 is well supported
  • VIX declines and S&P 500 increases => the uptrend of the S&P 500 is well supported
  • VIX decreases and S&P 500 decreases => S&P 500 may rise again

Of course, this relationship is not absolute and may be confounding like other technical indicators.

There is an article that the inverse correlation between the VIX and the S&P 500 is about 80%, which means that in 80% of the time, these two indicators run in reverse.

To what extent should VIX be noted:

There are some studies showing that VIX surpassing 40 is a must because it can cause US stocks to initiate a downtrend. In the past 10 years, the VIX milestone, especially when the US crisis occurred in 2008. When the VIX reached nearly 90


Where to see the VIX chart?

Now, what is difficult, just ask Google. Open Google and type in VIX Charting and it will appear immediately. Some good VIX watch pages can be listed below
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