VOLATILITY INDEX

TRADING STRATEGY

Zecman & Lipa

© 2019
STRATEGY ONE; M and W Candle Stick Pattern
This strategy should be applied on the following time frames: M5 & M1 respectively.
Buy Entry Point
When a graph (candle sticks) forms a (W) be alerted to place a buy. Always enter a buy when the
second leg breaks the neckline with two candlesticks. The following charts below illustrate
examples of a (W) candle stick pattern.

NB: The green dotted line indicates the entry point for a BUY.
Sell Entry Point
When a graph (candle sticks) forms a (M) be alerted to place a sell. Always enter a sell when the
second leg breaks the neckline with two candlesticks. The following charts below illustrate
examples of a (M) candle stick pattern.

NB; The red circled candle sticks, indicates the entry point for a SELL.
NB: with the M and W strategy always wait for at least 2 candle sticks to break the neckline. If
these candle sticks don’t break the neck line it means the volatility market is undergoing re-testing
therefore do not enter a buy or sell, wait until there is a clear indication. Below is a chart showing
a W pattern with various illustrations. This principle can also relate to the M pattern.
VIX WEEKLY CYCLE

As vix traders it is important to understand the reoccurring movements of the vix market in a week,
in order to perfect market entries and exits. Therefore, the diagram above shows uptrend and
downtrend movements that reoccur every after 3 days in a week. It is always advised never to enter
a trade when the market is in accumulation
STRATEGY TWO: Moving Average Indicators
This strategy involves the use of three moving averages to determine entry points within the
market.
Trend; The first thing you have to do when applying this strategy is;
 Identify the trend of the market using the M5 and M15. When the trend is identified place
a trade based on the M1 chart.
Note: A trend is movement in a specific direction over a certain period of time. There two types
of trends in the volatility market.
a) Up-trend: This is price increasing in an upward direction. It indicates that buyers are in control
of the market.
b) Down-trend: This is price increasing in a down-ward direction. It indicates that sellers are in
control of the market.
Sell Trend & Entry Point; If the market is selling the orange line (moving average) should be
facing down, it should also cross the candle sticks and the blue & white lines (moving averages)
to the right. . This orange line should be running far away apart from the two lines (blue & white).
The two lines (blue & white). Should also be facing down running on the right side of the
candlesticks, the blue line should always be in the middle of the white line and orange line.
Below is a chart that illustrates a sell entry poi
Buy Trend & Entry Point
If the market is buying the orange line (moving average) should be facing up, it should also cross
the candle sticks and the blue & white lines (moving averages) to the right. . This orange line
should be running far away apart from the two lines (blue & white). The two lines (blue & white).
Should also be facing down running on the right side of the candlesticks, the blue line should
always be in the middle of the white line and orange line.
Below is a chart that illustrates a buy entry point.
Alert
With this strategy, when the blue and white lines cross each other you have to be vigilant and wait.
Entries
When the orange line crosses over the candle sticks and the two lines (blue & white) then you
place a trade.

Take Profit
Hold your trades till the blue and white lines cross each other, when they cross you close.

Scalping
When scalping first identify a trend on M5 and M15 time frames then use only two lines (blue &
white) . Your entries and exits are on the crossovers as you close, you immediately open an
opposite trade. Note that scalping where there is no clear trend may lead you to a loss as the market
will consolidate.

Long Term Trades

When you place a trade on M1 and you have profited then you see two lines (blue & white) crossing
each other, if you don’t want to close and run a long term trade, you will use an orange line as
support/resistance as the two lines (blue & white) cross, then your trend is going to reverse, at this
moment you have to watch the behavior of the orange line to see if it will cross the two lines. If
the candle sticks just touch the orange line and return, without the orange line crossing the two
lines then hold and capitalize. If you’re selling and the candlesticks create an elbow, you have to
place a stop loss above that elbow, if you’re buying you have to place the stop loss below the
elbow.
SETTINGS FOR MOVING AVERAGES
To set the three moving averages
• Log in to your MT5 app, click on charts then click on f.
• Add all the three moving average setting on a tabloid titled main chart.
• Click on f+ then under trend section click on moving average
• For each mowing average setting press done and it will appear on your mt5 main chart.
1) Moving Average (white)- Exponential

NB: If the background of your mt5 app is white then set the color of this moving average to black.
2) Moving Average (orange)- Smoothed

3) Moving Average (blue) - Exponential

LOT SIZE GUIDE
a) V100
Account lot Size
$5- $100 use 0.10
$300 “ 0.15- 0.20
$500 “ 0.30- 0.50
$ 1000 “ 1.50- 2.50
b) V75
$5- $100 use 0.01
$300 “ 0.02
$500 “ 0.05
$ 1000 “ 0.05 – 0.10
c) V 25
$5- $100 use 0.50
$300 “ 1.00
$500 “ 1.50
$ 1000 “ 2.00 – 2.50

d) V10

$5- $100 use 0.20

$300 “ 0.50

$500 “ 1.00

$ 1000 “ 1.50 – 2.00

e) V50

$5- $100 use 3.00

$300 “ 6.00

$500 “ 7.50
$ 1000 “ 10.00

TIPS

 When building an account that has a small balance (less than $50) it is advised to trade
v100 and other volatility indices except v75, because v75 has the highest spreads which
makes it very risky.
 Back test these two powerful strategies on a demo account before trading on a live account.
Once you have perfected the entries you can trade can the live.
 Never enter a trade when the market is consolidating.
 Never trade using emotions.
 When trading vix, patience should be a virtue.
 Always have a daily or weekly target you want to reach. Don’t over trade.
 Don’t be greedy, close in profits when you have the chance.

Strategy Results
Before After

“ Those that aquire knowledge and apply it, are victorious “

ALL THE BEST AS YOU TRADE