LARRY CONNORS – TRADING CONNORS VIX REVERSALS & TRADESTATION FILES

The volatility index can be used to time trades. The market timing system was developed by Larry Connors. When the S&P 500 is likely to reverse is what it is used to identify.

You can use this indicator in addition to your regular market timing strategy.

What is it called?

TheVIX is a measure of future volatility. It shows us the level of fear and greed in the market.

Mean reverting is what volatility is. This means that periods of high volatility will eventually return to their mean and periods of low volatility will eventually rise to their mean.

After a market sell-off, you will want to focus on long positions. You want to be focusing on short positions after a rally. We do the opposite of the crowd.

There is a chart.

There is a chart of the vix.

CVR signals are different types of VIX reversals. Here are two of them.

The 10 period moving average is used.

The 10 period moving average is used in the first one. The moving average is shown on the chart. The S&P 500 will sell off if the VIX is 10% above the 10 period moving average. It will likely reverse back to the upside after reaching an extreme.

This has correctly predicted market direction 70% of the time.

This is not the same as a short setup. The 10 period moving average is where to look for short setups.

The RSI indicator is used.

The second one uses the RSI indicator with a 5 period setting.

The market is oversold when the RSI is above 70. Look for long setup. The market is oversold when the RSI is less than 30. Look for short setup. You can see the long and short signals in the RSI panel with green and red arrows.

The VIX reversals are used to identify market extremes in the S&P 500. In order for these signals to be significant, you will want to use them to trade the SPY or find charts of stocks that look similar to the S&P 500.

There are quite a few other short term trading strategies in the book, Short Term Trading Strategies That Work.

When you learn how often the market reverses when you get multiple signals all pointing in the same direction, you will realize how valuable this knowledge is. You will gain an edge over other traders.

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