No Surprises....
Today's dip was pretty much guaranteed. This shows how important it is to read and interpret chart readings. Anyone that looked at the chart of the VIX could have predicted this. This isn't rocket science. Instead, this is simply just a battle of discipline. Can you be disciplined enough to follow the markets unstable logic? The VIX readings are a freebie. In time, when the VIX is used by every Tom, Dick and Harry as a market direction indicator, it will become obsolete. By then, institutional investors will be manipulating VIX readings a 100 times a day in order to fool the average retail investor into losing his or her capital. For now it works, so use it, before you lose it.
posted by Nick M. @ 10:42 AM
2 Comments:
Great assessment of the VIX. It's been a brilliant indicator since I started using it, but I was wondering the same thing, about the overuse point you make. ...just how long it would take for too many people to start using it, making it ineffective.
Take care,
Chad.
Unfortunately overuse is common in stock trading. Everybody searches for the next "holy grail". Even technical analysis/chart reading is vulnerable. Nowadays everyone and their mother is talking about cups with handles, head and shoulders, wedges, ascending triangles, flags, etc. Before you know it, it will become nearly impossible for the average joe-shmo to become a profitable trader.
As far as how long it would take to make it ineffective, it depends. It depends on how much information on it and its use is being plastered onto the general masses. Years ago, I rarely heard of an analyst talking about VIX readings. Now, I hear them spouting about it constantly. Who knows. But when it does happen we'll hopefully have developed other reliable market direction/sentiment indicators.
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