Ever wondered if you can design a profitable trading strategy by trading volatility ETFs ? Well, yes you can. Those ETFs are highly ineffective vehicles on a long term investment horizon. However short term strategies have shown to be a rewarding way to trade these ETFs. Before we move onto strategy design we have to choose two volatility ETFs for backtesting. We will backtest our strategies with VXX and XIV ETFs since they are the most widely traded ones and have enough trading volume to keep our slippage low and guarantee fast order execution.
The goal of this research is to find various set-ups and exit strategies that could be used for trading the opening range breakouts. The fact that important economic news are often announced at 10:00 am makes it even more significant. Some analysts even claim that about 35% of the time the high or the low of the day occur within the first 30 minutes of trading and it defines the direction of the trend for the rest of the day. Our analysis will show if this argument holds true.
When it comes to trading there is a common belief that most behavior in markets can be explained by assuming that market participants make ‘logical’ trading decisions. In reality we know it’s not that easy. However there are market movements that are predictable because they repeat every year. These patterns are created by the collective actions of market traders themselves and can be used to predict the market.
We gonna show you something really interesting and when done correctly it can be exploited. We are talking about imbalances. You can basically do this with any time frame and any contract especially those with rising volatility and severe directional price changes for a prolonged period of time.
How does one determine whether an asset is fundamentally undervalued or overvalued? Gold. It’s the ultimate storehouse of value. Let’s have a look into the present and see if we can construct an indicator and use the gold price to measure the value of any commodity.