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Three Reasons to Pay Attention to the VIX Index - YouTube
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three reasons to pay attention to the
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VIX index by ww profitable trading tips
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com a useful trading tool is the VIX
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index this is a predictor of future
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market volatility there are three
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reasons to pay attention to the VIX
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index but first of all just what is the
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VIX index just what are its components
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VIX index according to the Chicago Board
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Options Exchange CBOE the CBOE
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Volatility Index is a key measure of
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market expectations of near term
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volatility conveyed by Standard & Poor
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500 stock index option prices since its
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introduction in 1993 Vic's has been
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considered by many to be the world's
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premier barometer of investor sentiment
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and market volatility for investors who
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wish to trade an instrument related to
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the markets expectation of future
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volatility VIX futures were introduced
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in 2004 and vicks options were
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introduced in 2006 in other words you
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can use the VIX as an indicator of
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future market activity or you can trade
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the fix itself the VIX is quoted in
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percentage points it translates more or
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less to the expected movement in the
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standard and poor 500 index over the
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coming month the number is annualized
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VIX is a registered trademark of the
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CBOE how to use the VIX the VIX index
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gives traders a heads up for coming
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market activity as a weighted mix of
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prices for a range of options on the
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standard and poor 500 index the VIX is
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an indication of what options traders
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think about the US economy
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thus the first of our three reasons to
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pay attention to the VIX index is that
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it is a harbinger of things to come in
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the broad US stock market traders use
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this information just like to use any
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other fundamental and technical data to
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help predict future stock prices because
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the VIX index and Standard & Poor 500
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move in opposite directions our second
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of three reasons to pay attention to the
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VIX index is that it can be a good
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indicator of where a standard and for
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500 ETF is going next the fix is
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frequently used as a measure of investor
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fear or complacency that is really not
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what it measures as consensus optimism
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or pessimism would not result in an
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especially I VIX accordingly it should
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probably be better thought of as the
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uncertainty index though it is fair to
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admit that there is a strong link
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between fear and uncertainty on the
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street nevertheless there is a negative
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correlation between the bix and standard
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and 4 or 500 index meaning that they
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move in opposite directions an article
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in investopedia talks about using the
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Vics for profit and hedging though VIX
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is frequently used as a measure of
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investor fear or complacency that is
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really not what it measures as consensus
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optimism or pessimism would not result
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in an especially high VIX accordingly it
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should probably be better thought of as
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the uncertainty index though it is fair
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to admit that there is a strong link
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between fear and uncertainty on the
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street nevertheless there is a negative
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correlation between the VIX and Standard
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& 4 500 index meaning that they move in
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opposite directions
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although the relationship of pics to
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standard in for 500 is not a one-to-one
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correlation the VIX is still a good
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predictor of the short-term direction of
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the S&P 500 and therefore the US economy
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using the fix for trend trading the
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trend trading definition in investopedia
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is as follows a trading strategy that
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attempts to capture gains through the
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analysis of an assets momentum in a
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particular direction the trend trader
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enters into a long position when a stock
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is trending upward successively higher
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highs conversely a short position is
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taken when the stock is in a downtrend
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successively lower highs our third of
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three reasons to pay attention to the
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VIX index is that it can provide good
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information as to when to get in and get
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out of a trade when trend trading visit
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www tips com for more information and
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insights about trading currencies stocks
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or commodities
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