VIX measures market expectations regarding volatility in the next 30 days for the S&P 500 index. Calculated with price options, a higher VIX number implies higher stock market volatility, while a lower number indicates a period of lower volatility. Simply put, when VIX increases, the S&P 500 will weaken, so that should be a good time to buy shares. You can simply go to http://www.volatility75.net/brokers.html if you are interested in Volatility 75 Index.
Data below 12 are considered low, and levels above 20 are considered high. The highest intraday record of 89.5 occurred in 2008. Comparing actual VIX with expectations can help identify whether VIX is “low” or “high”. It can also provide a clearer picture of market predictions related to future volatility.
There are a number of other similar indices on the currency and bond markets implied with option prices, which are also very useful for measuring volatility.
If we want to explore more deeply about price fluctuations that are more specific in a particular market, it helps us look at implied and realized volatility. The first describes current market prices based on expectations of movement over a certain period of time. This forward-looking data can be used by traders to calculate future market volatility; for example, the movements and ranges implied by a currency pair with a significant degree of confidence. This is very useful for calculating stop distance and position size.
Fear & Greed Index
VIX is included in another popular barometer known as the Fear & Greed Index. In this index, CNN reviewed seven factors to assess investor sentiment by taking the same weighted average for each factor.
This index is measured on a scale of zero to 100 – extreme fear of extreme greed. The number 50 is considered neutral. This index is a marker when fear reaches its peak.
On the other hand, realized volatility is the actual price movement that occurred during a certain past period. Technical analysis indicators such as Average True Range (ATR) and Bollinger Ribbons can help determine them. ATR shows how much the asset moves on average over a certain period of time. A declining ATR indicates a narrower price range, which is lower volatility. ATR increases indicate higher volatility.