What is the VIX Indicator?
Created by the Chicago Board Options Exchange (CBOE), the Volatility Index (VIX) is an indicator that serves an important role. This indicator provides traders with a 30 day forecast of the stock market’s expected volatility, which is derived from the price inputs of the S&P 500 index options.
The VIX is often referred to as the “fear index” or “fear gauge”, as it measures traders’ sentiment and market risks. In other words, before making any investment related decisions, market analysts and experts look to the VIX’s chart movements.
How can you use the VIX Indicator while trading?
In assessing the stock market’s behavior, higher values relating to the VIX index point to an increase in the traders’ anxiety and vice-versa in most cases. The market and the VIX are connected. This connection is illustrated when traders are panicking in the market and that causes the VIX to spike.
Traders can incorporate the VIX index into their trading in two ways.
First, they can look at the VIX’s level to determine its stock market implications. Another method involves comparing the current ratio to the long-term moving average of the VIX, which could provide a more stable reading in the form of an Oscillator.
Why should you trade the VIX Indicator with CM Trading?
When trading with major indicators like the VIX, it is best to consider entering the global market with a trustworthy and experienced online brokerage that can offer you the top trading tools and conditions available on the market.
Africa’s largest local award-winning broker CM Trading is just that. We offer our traders unique trading tools like the Guardian Angel automated live trading signals and feedback system and the CopyKat social trading tool to ensure you are maximizing your trades’ potential.
Join us today and enjoy our incredible services:
Open your live trading account today!