Thursday, March 25, 2010


Bloomberg recently published a story on the VIX indicator. The story discussed the findings of Birinyi Associates and VIX. Birinyi concluded that it does not work as a market timing tool. The VIX indicator measures volatility and is generally thought of as a measure of “fear” or “complacency” in the market.

I too have researched VIX in the past as a possible market timing indicator. I studied and backtested my own ideas. I researched and backtested Laurence Connors’ ideas. I tried all sorts of variations. One idea that I thought was great was trying to measure extremes in VIX by using Bollinger Bands on it, etc. Nonetheless, I too concluded that VIX was not helpful for my trading and I agree with Birinyi.

One idea I can share with readers is that many traders make the mistake of looking at the VIX’s absolute levels and comparing those to the past. This is nice, but this approach, or any other, will probably lead you to the same conclusion I came to.

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