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Trading Systems & Strategies

An Adaptive Moving Average Using VIX, 01/02/09

An Adaptive Moving Average using VIX

VIX can be used to create an adaptive moving average that can be used as an indicator or as the basis for a trading system or model.

ma = Average(close, VIX), or

xma = Exponential Average(close, VIX), or even

macd - MACD(12, VIX, 9)

The problem w/ moving average systems is how to exit a bad trade since the core entry conditions won't have changed and will still be in place after the adverse move.

Test a moving average indicator by converting it to a trading system and calculating it's z score. If the z score is significant, the indicator's signals should be significant, too.

Henry Carstens
Vertical Solutions
carstens@verticalsolutions.com

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