Using the VIX to day trade or swing trade

… thanks Phil, now you jinxed me. Lol.  Anyway, for those StockTwitters genuinely interested hope this helps…

Educational Posts on IBC on using the VIX:

– January 27, 2009  Using the VIX to trade long side (FAS).  (day trade)

– January 22, 2009 Using the VIX to trade long side by shorting FAZ. Head and Shoulder breakdown on VIX.  (day trade)

– January 16, 2009 intraday reversal spotted using VIX above 50 for contrarian setup. (day trade)

– January 16, 2009 How to spot rare day-trading days using the VIX and technicals (day trade)

– January 15, 2009 Using the VIX to trade the bull side again. Long FAS. (day trade)

– January 13, 2009 Prepare for a battle to no where with the bulls versus the bears. Poker analogy to show that there is no edge, therefore bet small. (swing trade)

– January 7, 2009 Wave Trading Basics. A little tip on how to trade momentum tapes.  (swing trade)

– January 6, 2009 Betting against the news. Using complacency in overseas market to time EEV on the bottom (rose 40% from this point in a few days) As a contrarian trader, I look for complacency on news headlines. If markets rally on low volume, then its probably time to bet against them.  (swing trade)

– December 31, 2009 Predicting the top of the Nov-Dec-Jan rally at VIX 35-38.  Vix bottoms right below 40, sending Dow down 1,100 points  (Swing Trade)

Improve your trading- use the VIX!  Understand that the market is moved by fear and greed.  It always has, and always will.  People buy and sell on emotion, and when you figure that out and learn how to use that as a tool, you will drastically improve your trading.  Now get out there and make some money.

ALoha!
-gio-

Comments »

Hey guys, I decided to do things a little more differently.  Instead of me annotating the trade, try and see if you can figure this out yourself.  This is a good example of how the $VIX + technicals on the broad market,  move the leverage ETFs like FAZ or FAS.

In this chart, I shorted FAZ using the green colored arrows.  You also could have went long FAZ using the red color arrows for a ridiculous gain.  The question is, Why?

Use the VIX and the DJI chart in your answer to why you would short or get long FAZ at the red and green circles.  I’ll give you answer later this weekend.

Comments »

Party starts at VIX > 44

Comments »

 

I knew it!  I knew there was something evil brewing with Dryships.  I was heavily short this dumb company, but ended up covering 1/2 today due to that stupid on-the-Fed-news rally.  Lol. 

Take a look at DRYS now, down -20% after hours on bad “loan news” (http://www.reuters.com/article/marketsNews/idINBNG3011520090128?rpc=44). 

DRYS has effectively reached my “single-digits” target I made when it ran up to 16 this month.  I’m starting find more and more of these bad business practice companies.  Remember ARTC?  It’s a pinksheet now. Lol.

Here’s my death hammer on the entire Shippers industry I made back in July.  Sink ’em:  http://www.thehawaiitrader.com/2008/07/charts-coal-stocks-jrcc-pcx-ncoc-ico.html

Comments »

I’m expecting a spike down on the VIX tomorrow, but I think the tape will be a little hesitant with so much combinations of news, so I plan on cutting all day trade positions in half.  For now, once the VIX slows down and finds an intraday support I think you can spot a good fade in the morning.  Over the weekend I mentioned I was switching to a bullish bias (tried shorting FAZ all week for a swing, no go!), for the fact that the VIX was getting weaker with every dip-buying/panic-cover rally last week.  So far, that has been the winning side, as I’m sure a lot of bears have been frustrated for almost half the month now.

… well, that’s what I need to play the contrarian.  When there is panic, either for the bulls or bears, then at least I know there is imbalance in the market, and like a pendulum, I have to wait for the sentiment to shift at its peak before putting on my contrarian cape.   For now, strategy of “buying the dips” still holds until we hit stupid complacent levels.

Already, I can sense the herd coming in, but I don’t really want to fight them (on the swing side)… not yet.

So that’s it.  I’ll be keeping watch for the VIX to spike down then find support (you DON’T want to short a VIX that just gradually falls. We need “spikes”.  If VIX just gradually falls, then load up on FAS) perhaps around 37-40 if we’re fortunate, then we fade.  However, near the close I prefer to ride a rally.

Oh yeah, don’t forget crude inventories come out in the morning.  There should a nice trend in that sector, so I’ll probably be hanging out there.

Shout out to my @StockTwits buddy Phil Pearlman, for all the encouragement and hard work he puts on StockTwits.  Phil’s obsession is in market participant behavior and market sentiment models, which goes well with my “think outside the box” approach to the market.  He’s got a new blog, so check him out and witness his narration of the evolution of the human-ticker!

ALoHa!
-gio-

Comments »

Today was not a really good day to day trade, but I did make one trade.  It sort of illustrates how to use a breaking down VIX to find an entry for “stupid longs”.

Above is the trade I made, using “Vix breakdown below 43.20” for entry on FAS just under 9.  And here’s the thought process documented on StockTwits…

http://stocktwits.com/u/thehawaiitrader/1152509484

Despite a choppy tape, made the call on FAS.  It was bold and stupid, but it made it. Lol.

Day high on FAS was 9.55, which occurred in final 30 minutes of trading.  Was expecting a better breakout.  Oh well.

One final note:  the VIX is approaching a key support area using a 15-day chart.  I used today’s rally to exit some swing longs and enter new shorts.  I’m not the only one who spotted last week’s funky Vix reversal.  Someone tipped me off to EvilSpeculator’s post on the Vix yesterday, which uses Bollinger bands and other fancy stuff.

Comments »