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What Is VIX-75?
According to Deriv (A broker that hosts VIX-75), VIX-75 is a simulation of real-world market movements. This means that VIX-75 is an ideal trading instrument since it is available 24/7 and is not affected by global events, or market and liquidity risks.
But without a strategy, you’re almost guaranteed to lose 90% of your trading capital within 90 days of trading. This is why Forex Made Simple is bringing you this simple but very effective VIX-75 trading strategy. Get ready to take notes and learn this valuable information that will impact your trading journey in a very positive way.
How VIX-75 Moves.
VIX-75 is a highly volatile index, this means there’s a lot of trading opportunities every day on this index. And the good news is that there are recognizable patterns within the movements that VIX-75 makes. For this strategy, we will focus on reversal patterns since they are easily recognizable even for a beginner trader like you. As you can see from the picture, VIX-75 moves in waves, which forms uptrends and also downtrends. And the magic happens when you pay attention to how VIX-75 changes from one trend to another, this is where money is milked from VIX-75. The patterns that VIX-75 makes before changes from one trend to another are called Reversal Patterns. These are very important for technical trading as a whole not just for VIX-75, so you will have to learn them thoroughly. But don’t worry, FMS will guide you through this.
Reversal Patterns
Reversal Patterns are alerts from the market shouting “pay attention to me, I’m about to reverse”. So your job is to take the message that the market is telling you. For this strategy, we will focus on 4 patterns, Double Top, Double Bottom, Bearing Head and Shoulders, and Bullish Head and Shoulders. In truth, these are just two patterns since Double Bottom is just an upside-down Double Bottom and Bullish Head and Shoulder is just an upside-down Bearish Head and Shoulders. The easy way to spot these patterns is to identify Double Top as forming the shape of a letter “M” and Double Bottom as “W”, a head and shoulders pattern looks like a person’s head and shoulders.
The Strategy
Double Top and Bearish Head and Shoulders signal a switch from uptrend to downtrend. We will call these “Bearish Reversal Patterns”. And Double Bottom and Bullish Head and Shoulders signal a switch from downtrend to an uptrend. We will call these “Bullish Reversal Patterns”. Quick tip, “Bearish” is associated with a downtrend movement, and “Bullish” is associated with an uptrend movement. Hence Bearish Reversal Patterns signals a SELL and Bullish Reversal Patterns signals a Buy.
Entry Types
These patterns are more visible and reliable on the 5 Minutes timeframe (5M) and 15 Minutes timeframe (15M).
Double Top
After spotting the first top, a line must be drawn above the top as an anticipation for the second Top. Then you should wait for the second top as shown in the picture below.
After the second top is spotted, wait for the market to make a small turn to the downside then place a SELL entry. This is usually the second RED candle.
Double Bottom
After spotting the first Bottom, a line must be drawn below the Bottom as an anticipation for the second Bottom. Then you should wait for the second bottom as shown in the picture below.
After the second Bottom is spotted, wait for the market to make a small turn to the upside then place a BUY entry. This is usually the second Green candle.
Bearish Head and Shoulders
After spotting the Left Shoulder and a Head is spotted, a line must be drawn above the Left Shoulder as an anticipation for the Right Shoulder. Then you should wait for the Right Shoulder as shown in the picture below.
After the Right Shoulder has appeared, wait for the market to make a small turn to the downside then place a SELL entry. This is usually the second RED candle.
Bullish Head and Shoulders
After spotting the Left Shoulder and a Head is spotted, a line must be drawn below the Left Shoulder as an anticipation for the Right Shoulder. Then you should wait for the Right Shoulder as shown in the picture below.
After the Right Shoulder has appeared, wait for the market to make a small turn to the upside then place a BUY entry. This is usually the second GREEN candle.
The 3 RULES
- Put your emotions aside.
- Never Trade without a stop loss.
- Always move SL to break even after you’re in profit.
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