Good Evening, I need some help in understanding a concept .......... My thought is that , if 90% - 100% of the time ,that the VIX moves in the Opposite direction of the ES and YM ( this is theoretical of course ) , but these Markets do seem to Move Inversley from one another , almost Everyday I look over the Indexes If this is the case, and a great setup ( Based on my trading Method ) occurs via analysis of the Chart(s) , then would it ever make since to trade either the ES or the YM in the Opposite direction that I am expecting the VIX to move ? So if I am assuming the VIX to move to the upside, then I'd short the Ym and or the ES ( No matter if I get a great setup on the ES or YM ) This all might not be a smart way to trade , since I'm sort of going on Blind faith in trading 2 Markets Inversley of one another , when only ONE of the Charts on any given day, is likely to give me the setup I look for on any Market to place a trade Thank you for any thoughts and comments
I think the main miss in your strategy is that you have an idea of how the VIX moves... The VIX moves mainly on how the ES (broad stock index) moves... not the other way around. But generally, yes.. the VIX moves up when ES moves down, but not always. You do know how the VIX is comprised right? Have a read up on the theoretical basics before trading VIX. Also, if you trade them both in opposite ways, you basically double your exposure... and double your risk..
If you short 1 and long the other and they both go in opposite ways to each other, than you might aswell, just have 1 position in 1 of them, cause if 1 trade is wrong then both are wrong. As above double your risk well your Comm's atleast. Long and Short 2 markets which track each other, you have to take profit on the 1 when the other is losing the same amount, but if you don't pick a bottom / top then you've got zero initial profit and the chance the remaining position with no hedge could keep going against you, so you back to a single trade again. if there was a short cut, we'd all be using it sadly
yes, that is the idea. I know nothing about the VIX, but always spread 2 underlyings that are loosely correlated. You will need to leg into the whole thing and constantly readjust your limits. You will need enough capital to trade many contracts of each. For this type of trading there are no stops, you must be able to let one side run very hard against you. Entry is everything. Always fade. When everybody and their mother is selling you are the one guy trying to buy one more contract. Not sure about ES and VIX, but that is the idea.
There have been a number of occasions where I have placed a long term long trade with cash on a given stock and then intra-day ( short and long) traded the same stock on mergin.
So are the S&P, the FTSE-100, the Nasdaq, the Dax and many other indices people trade. http://www.investopedia.com/stock-analysis/2012/4-ways-to-trade-the-vix-vxx-vxz-tvix-xxv0504.aspx
I can trade the SP500 with ES, SPY, SPX... you cannot trade the VIX. Maybe you should study a little before jumping in with simple answers.