Off your game?

Read our free Dr K report on how to optimize your mind and body so you can boost your focus when trading the markets.
Your email will always remain private.

Frequently Asked Questions

Dr K VIX Volatility Model
VVM vs MDM: The Market Direction Model (MDM) has had a challenging time with these trendless markets as I've been unable to profit from it. Meanwhile, I've been able to profit nicely by taking early profits from a couple of the VIX Volatility Model's (VVM's) signals since its recent launch. Please comment.

A: The markets have become increasingly more difficult to capture trends as was evident in 2015, a year which, by some media accounts, was the most challenging in 78 years. Of course, that also was accompanied by some saying trend following is dead. Such declarations have been made numerous times over the last hundred years, and usually is followed by markets that return to a trending manner as human nature has not changed. 

That said, MDM attempts to capture intermediate term trends which is nearly impossible to do in non-trending markets. The good news is that since QE has ended in the US, MDM has reverted back to its old non-QE rules as of February 2016 as the tone of the US market this year has clearly moved away from the non-correcting QE-driven markets especially starting in 2013. Indeed, MDM's performance has materially improved over the last 12 months (as of this writing on 4/18/17). 

As for the VIX Volatility Model (VVM), it was inspired by the trendless market of 2015, so is designed to capture short term moves in volatility. Indeed, it has captured quick 15%+ gains in a day or less when it was in its beta testing phase on the website and also more recently since its formal launch. Such gains are now reflected in the VVM performance table and prior to that update were mentioned in the VVM reports we emailed to members (see report archives).

VVM also captures trending moves where it can sit on a signal for several weeks. Despite the trendless markets of 2015, backtests showed it had profitable signals lasting as long as 9 weeks in 2015 as it captured the trend in the ETF XIV. Outside of this trend, it was still able to finish 2015 up nicely overall as the fewer but larger profits outweighed the many smaller losses that year. The fail-safes proved to be of great value in keeping risk to a minimum.

In the years prior to 2015, VVM switched signals fewer times on average while continuing to achieve strong results. That said, the only thing that never changes is change, so while the results are so far highly promising, always keep in mind that past results are never a guarantee of future results. Thus should VVM have a string of highly profitable back-to-back signals, this is no reason to start oversizing your position.

Published: Mar 8 2016, Modified: Apr 18 2017