What is volatility index VIX?
Before learning the volatility index lets understand what is volatility. So volatility is the amount by which the price fluctuates in a period of time. It is measured by some mathematical calculations… I don’t want to go in that detail. Volatility index shows this fluctuation of prices over a given period.
How trading can be done using VIX?
Well, we know that high volatility makes the markets thin / sideways/ range bound or volatile. So while looking for a trade in nifty future or nifty option writing one must check that, if the volatility is low so that trend traders can be on the right side of the trade. Now if a trader is writing nifty options then he must check the volatility before taking the trade, since high volatility will make the price fluctuate and may even see reversals in no time so trading risk gets increased. On the other side if you are a trend trader for nifty future and want to confirm if the current trend will sustain for some time then traders must see lower volatility in VIX chart. If nifty is trending with low volatility then it is most likely to continue moving in the same direction.
