A lot of people always think about the VIX as fear which is actually a skewed definition, though technically correct. The actual effect of the VIX is on the trading range for the day.
This is commonly referred to as the ATR or the average trading range.
Take a look :
I have smoothed the ATR with a 20 point moving average to give approximate values.
The chart of the Nifty projects an average trading range of 111 at current prices.This is way up from the 60 since last September.
There is additional movement to negotiate for the intra day player and he has to be careful in setting his stops and targets, as what worked for him maybe in sept may not work for him today.
The Bank Nifty's ATR is at 289 up from the 160 in sept last year.
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3 comments:
Hi Shai,
How to Use Average True Range for Short-Term Trading
http://www.tradingmarkets.com/.site/stocks/how_to/articles/How-to-Use--Average-True-Range-for-Short-Term-trad-81414.cfm
Alphabet 1,
Thank you for the link.It's just amazing to know, how smart traders actually are.
@alphabet1
Thanks for the excellent link!
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