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I need some help in understanding a concept .......... My thought is that , if 90% - 100% of the time ,that the VIX moves in the Opposite direction of the ES and YM ( this is theoretical of course ) , but these Markets do seem to Move Inversley from one another , almost Everyday I look over the Indexes
If this is the case, and a great setup ( Based on my trading Method ) occurs via analysis of the Chart(s) , then would it ever make since to trade either the ES or the YM in the Opposite direction that I am expecting the VIX to move ?
So if I am assuming the VIX to move to the upside, then I'd short the Ym and or the ES ( No matter if I get a great setup on the ES or YM )
This all might not be a smart way to trade , since I'm sort of going on Blind faith in trading 2 Markets Inversley of one another , when only ONE of the Charts on any given day, is likely to give me the setup I look for on any Market to place a trade
Thank you for any thoughts and comments
Can you help answer these questions from other members on NexusFi?
I don't trade or know much about the VIX, but I do know about correlations, all of my trades are based on them: ES with YM, ZB with ZN, and the inverse correlation of 6E and DX. While these correlations work most of the time, a part of my trading methodology does require independent evaluation of each instrument. What i mean is, the correlation itself is only a part of my evaluation to put on the trade.
If you have interest in correlations in general I would highly suggest MRCI Online. I check it daily.
Our life is our own today. Tomorrow you will be dust, a shade, a tale that is told. Live mindful of death, the hour flies.
If you think the VIX will rise, why wouldn't you just go long the VIX?
Correlations don't always hold up and so trading a different security solely based on your opinion on the direction of the base security actually lowers your probability on the trade.
Think of it this way...
You have a 70% conviction that Security A will rise
Security B is negatively correlated to Security A 80% of the time
70% x 80% = a 56% probability that Security B will fall versus a 70% probability that Security A will rise
happyrenko,
that Grid Correlation ( MRCI ) is fantastic
Thank you for sharing
Do you know if such a Grid Correlation occurs for the Forex markets ?
MWG86
I never thought to calculate out the wau in which you did, regarding the Probabilites of two " Inversely Correlated Trades "
It definitely makes sense now
