A book by Laurence Connors, "Trading Connors VIX Reversals" The basic premise appears to be that the value of the VIX is not as important in and of itself, as compared to the fact that the VIX is supposedly mean reverting. That is, if it gets extended far beyond the 5, 10, or 20 day moving average, that it has a high probability to move back towards the value of the moving average. In the past, I had a few occasions to apply the CVR setups 1, 3, 6, and 7 for the QQQ's by using VXN.X as the indicator. However, I have noticed that sometimes the signals may be premature, perhaps by a day or two. But sometimes dead on. I never place value on these unless there are at least two confirming setups and three are better, which rarely happens. The main problem I am aware of using these setups, is that there can be some serious drawdowns. And because of this, I am not totally confident relying on these setups alone unless there are other confirming reasons.
Thanx Kowboy, Also...when you say that the signals discussed in the book... may be premature, perhaps by a day or two... Sounds like the book was about swing trading (holding overnight) and not so much about intraday trading. Please correct me if my assumption is wrong about the book not being a daytrading tool. NihabaAshi
They are timed to enter at the close of market at the end of the trading day, so you need to be watching the VIX or VXN near the market close. The typical hold is one to three days. But, I have noticed a few instances of profitable trades exiting the next morning. I am uncomfortable holding much long overnight because of potential event crisis, but do not mind holding shorts overnight.
I got curious about this over the weekend. I was wondering what the lag time of VIX and VXN calculations are. When I see a new value for VIX/VXN in my intraday charts, are they reflecting volatility derived from option prices 5 second, 30 second, 1minute ago etc..(assuming no delays between the time CBOE sending out the data and I see it in my charts )? Please note that I'm NOT asking about the refresh rate of the quotes. Thanks, Chinook
here is one way i use VIX in intraday : when the vix comes from above 50 and breaks down this figure in intraday i buy anything on the market with leverage. At the end of the day i sold 50% and keep the rest ( not intraday i know ) This is a HUGE BULLISH pattern , look the compx for exemple in daily and look for the days it happens ( only 1 or 3 times a year unfortunatly). Just my 2 ( 2000 ? ) cents
in 2002 it happens 2 times during the year above 50. 0 time in 2003. I did not say it happens a lot but when it is the case Big profits are quiet easy to take.