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Frequently Asked Questions

Dr K VIX Volatility Model
Please further explain the profit taking rule on BUY signals

The VVM focuses on protecting one's downside since the upside often more than takes care of itself especially during periods of heightened volatility.

Since the late August beta launch, the model has had several 13% to 18% or greater gains within 1-2 days on buy signals, but often, such gains would reverse as volatility tends to swing widely during such times. 

This led to the UVXY profit taking rules should profits exceed a certain threshold. This acts as a trigger to let profits run but stops are kept very tight. The threshold is contextual to market conditions but seeks at least a 12% to 18% profit. The numerous boldfaced entries in the results table show when the profit taking rules were activated.

The results table now reflects the following integrations into the model:

1) The UVXY profit taking rules

2) No override of the model's signals. While there were two signals I overrode that were highly profitable as I wrote in an earlier report, I also overrode a number of signals which were only mildly profitable and unprofitable. The challenge is it is impossible to know ahead of time which signals will be unprofitable and which will be hugely profitable, so it is best to take all signals.

3) No override of fail-safes.

4) Integration of the VIX Spiking strategy.

Published: Jun 15 2016, Modified: Oct 23 2016