VIX Volatility Model - When to take profits

Published : June 13 2016 at 10:50 ET

As we have written, SELL signals do not have profit taking rules built into the VVM algorithm, so it is up to each member to decide if and when they with to take partial profits. The profit taking algorithm applies only to BUY signals since volatility can spike during such signals. 

Sell signals, on the other hand, are often longer term as the market steps its way higher over a period of weeks. The fast round trip on the model's recent sell signal is highly unlikely but can on rare occasions occur. That said, testing has shown optimal results are achieved by simply following the model's signals without taking profits on sell signals. But the money management aspect of trading is up to each individual as some opt to take profits early, even ahead of the 15%+ profit taking signal on VVM buy signals, since even a fast +10% gain in these markets makes a difference.

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