Dow Jones - VIX ( 06.2011 - 08.2014 study)

FX:US30   Dow Jones Industrial Average Index
156 2 4
The rules for this strategy are very simple. When the VIX             index crosses over 18, wait for it to close below 18, on a daily basis.
If it closed below 18, enter a long trade. There are two possibilities for setting the stop loss. If, at that time, the Dow has been in a trading range, place the stop below that trading range. If there is no trading range, place a stop below the signaling candle, not only one tick below, leave some space for wiggles. Taking profits is the hard part, and that is totally discretionary, as I have not found a rule for that.

Between 06.2011 and 08.2014 there have been 15 buying signals, 8 of them have resulted in very profitable trades and 7 of them resulted in loses. I have marked every trade on the chart, with the take profit at the most extreme point. I hope you understand that this study is hypothetical and that no one would ever take profits at the most extreme point of a rally. Considering that you don't have an edge because 50% of trades are profitable (my guess is that if you backtest a few more years the percentage will remain roughly the same, ranging from 45% to 55%), the only thing that makes this strategy profitable is getting rid of losers fast, and letting the winners roll.

This is a strategy that can be used on its own, but it's not the best out there. The second possibility is using this model for confirmation for another strategy.

As I said before, I hope you understand that these results are hypothetical and you would never make as much money as the risk/reward drawings point out.
Many thanks for the sharing on this correlation chart Adrian.
Is there ny correlation between VIX and XAUUSD (Gold) price or does it more correlates to DXY instead ?
You're welcome! I don't know about Gold or Dollar, I have not studied the correlation.
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