Real Time VIX Trading Signals
Using the VIX on the SPY chart as a proxy for the ES is an excellent idea to develop lower risk and higher reward trades. The reason we are trading with the established trend in the VIX, also known as the volatility index. When the VIX is falling, the ES price is normally rising, and when VIX is rising, the ES price is normally falling.
The ZoneTraderPro Divergence indicator can be used on stocks, even though it was designed for the ES futures. It becomes really interesting because you will get signals in the SPY that you will not in the ES futures.
The ZoneTraderPro Divergence indicator is made to detect 3 types of divergences. Those types are regular divergence, accumulation/distribution divergence and special divergence. The most common question about the indicator is when does it print? This is pretty simple. You tell the indicator what zigzag you want to use. In the above example the zigzag is set to thirty five cents. This value is matched to the zones. When you see a zone start to print, that is the bar the indicator will begin to evaluate and give a signal in real time.
Regular divergence is what you expect. The price is higher but the cumulative delta is lower. In the picture above, there is a LONG regular divergence signal labeled BULLISH. There is a blue DISTRIBUTION divergence below that became Non-Divergent. If a signal becomes non-divergent, it does not disappear from the charts.
Special divergence is a signal unique to ZoneTraderPro. It occurs when there is a divergence from a low to a high, or a high to a low. So in other words, if we have a rising price, instead of having the expected positive delta, the delta is negative.
As a general rule, we see this in a short trade on the SPY. It is possible to get a special divergence long trade signal, but it is less common. In the above picture we have 2 long examples.
Accumulation / Distribution Divergence
This type divergence occurs when shares are being accumulated or distributed. This signal is based on all trading that occurs between a high to a high, or a low to a low. It takes into account both limit and market orders. These trades will have a green ACCUMULATION or a red DISTRIBUTION marker.
As a general rule, we see this in a long trade. It is possible, but less common to get this for a short signal on the SPY.
There is a SharkIndicators BloodHound template created by ZoneTraderPro on the charts on this page. They reflect a new template based upon the $VIX and is available to ZoneTraderPro customers.
Week in Review – Trading with ES, SPY and VXX Divergences
In this video we review the week of August 16-20 which featured some significant volatility, using divergences formed on the SPY and VXX stock charts. This video also features the new ZoneTraderPro VIX BloodHound template which is used to determine the trend direction.
Week in Review 7/16/21 Using the New Real Time Template
In this video we look at the weeks trades ending on 7/16/21 and make some interesting observations involving the distribution levels and iceberg orders.
New Real Time VIX Template – Week in Review 7/6/21
In this video we look at the new VIX real time template and review 1 week of trades using ZoneTraderPro divergences and the VIX.
So when we look at the chart above, we have a long signal that traded down .44 (about 18 ticks on the ES) and a very high KP2 ratio of POSITIVE 3921. This means that for every penny of drop, the delta was 3921 shares BOUGHT, not sold. This is a good setup, but how do you develop an entry? With the new Real Time VIX templates we develop an entry signal just off the lows.
Next we see a distribution short signal that failed. Now there was distribution occurring, and this is seen in the KP2 ratio (3032) at the high, but the real time did not indicate a short until price traded at the high, keeping us from entering a trade early. The template then called the high, and a 9 point move lower.
The same exact thing occurs on the way down. A long signal is triggered on the way down, but price drops an addition 6 points after 1st receiving the signal. What is interesting to note here, is the ratio was a POSITIVE 3333. This means that for every penny of drop, the delta was 3333 shares BOUGHT, not sold. The chart on the right is the ES with the same template. Price traded 12 points higher after the low. It took 5 ticks on the ES chart to give the buy signal. And then the VIX and the cumulative delta were in our favor.
The Standard VIX Template
The standard VIX template is meant to show the trend of the VIX. However I am always referencing the actual VIX chart before making a trading decision. On the right is a 3 minute VIX9D chart. We have a couple very small bearish pullbacks, but the afternoon trend is clearly bullish. The standard VIX template chart developed no bearish signals after 1300 hours, which was very good. That is the purpose of the standard chart.
Here is the Real Time Template
VIX9D Template Versions
On the new VIX9D template (distributed 4/17/21) there are 9 versions. Two of the versions are cumulative delta based only. Users are encouraged to test the different versions to determine what is appropriate for your trading. So that you understand what the signal is being generated by, here is a list of the template components.
Versions using $TICK and $ADD are not valid until the market opens.
- V1 is the VIX9D and the $ADD symbol
- V2 is the VIX9D, $TICK, and a FOREX pair considered a leading indicator
- V3 is ONLY based on 2 cumulative delta indicators
- V4 is ONLY based on 1 cumulative delta indicator
- V5 is the VIX9D and 1 cumulative delta indicator
- V6 is the VIX9D, 1 cumulative delta indicator, and $TICK
- V7 is the VIX9D and 2 cumulative delta indicators
- V8 is the VIX9D, 2 cumulative delta indicators, and $TICK
- V9 is the VIX9D, 1 cumulative delta indicator, and $ADD
Limitation of the VIX9D Template
There is a basic limitation on the VIX9D, because the indicator is only valid from 0930 to 1615 EST. The VIX9D is accounting for options that expire in the next 9 days. So at the open there will almost always be a gap, which will be read incorrectly by the indicator. The regular VIX indicator starts at 0300 EST so its signals are valid at the open.
VIX Template Versions
On the new VIX template (distributed 4/17/21) there are 7 versions. Users are encouraged to test the different versions to determine what is appropriate for your trading. So that you understand what the signal is being generated by, here is a list of the template components.
Versions using $TICK and $ADD are not valid until the market opens.
- V1 is the VIX and a FOREX pair considered a leading indicator
- V2 is the VIX and 1 cumulative delta indicator
- V3 is the VIX and 2 cumulative delta indicators
- V4 is the VIX and 1 cumulative delta indicator
- V5 is the VIX and 1 cumulative delta indicator (different than V4)
- V6 is the VIX, 1 cumulative delta indicator, and $TICK
- V7 is the VIX, 1 cumulative delta indicator, and $ADD
I will send you license validation file in Skype. The license checker is installed using the NinjaTrader Control Panel.
Download the VIX Files
Right Click and Save As the zip file containing the BloodHound Templates.
Place these files into the BloodHound Templates folder directly when they are unzipped. The path is shown below.
This download now includes the new VIX template released 7/18/21.
You must connect to Kinetick first when you start NinjaTrader.
Real Time VIX BloodHound Templates
In this video we look at new Real Time VIX BloodHound templates and a very special offer for new customers of ZoneTraderPro.