Mathematically, SVIX is the complement of the original Stochastic Oscillator, with such a simple transform reproducing Williams' VixFix and the VIX index signals of high volatility and hence of market bottoms quite accurately but within a bounded 0-100 range. Having a predefined range allows to find markets bottoms without needing to compare to past prices using a bollinger band (Chris Moody on TradingView) nor a moving average (Hesta 2015), as a simple threshold condition (by default above 80) is sufficient to reliably signal interesting entry points at bottoming prices.
Having a predefined range allows to find markets bottoms without needing to compare to past prices using a bollinger band (Chris Moody on TradingView) nor a moving average (Hesta 2015), as a simple threshold condition (by default above 80) is sufficient to reliably signal interesting entry points at bottoming prices.
Indeed, as Williams describes in his paper, markets tend to find the lowest prices during times of highest volatility, which usually accompany times of highest fear.
Although the VixFix originally only indicates market bottoms, the Stochastic VixFix can also indicate good times to exit, when SVIX is at a low value (default: below 20), but just like the original VixFix and VIX index, exit signals are as usual much less reliable than long entries signals, because: 1) mature markets such as SP500 tend to increase over the long term, 2) when market fall, retail traders panic and hence volatility skyrockets and bottom is more reliably signalled, but at market tops, no one is panicking, price action only loses momentum because of liquidity drying up.
Compared to Hesta 2015 strategy of using a moving average over Williams' VixFix to generate entry signals, SVIX generates much fewer false positives during ranging markets, which drastically reduce Hesta 2015 strategy profitability as this incurs quite a lot of losses.
This indicator goes further than the original SVIX, by restoring the smoothed D and second-level smoothed D2 oscillators from the original Stochastic Oscillator, and use a 14-period ZLMA instead of the original 20-period SMA, to generate smoother yet responsive signals compared to using just the raw SVIX (by default, this is disabled, as the original raw SVIX is used to produce more entry signals).
- Set the timescale to daily or weekly preferably, to reduce false positives.
- When the background is highlighted in green or when the highlight disappears, it is usually a good time to enter a long position.
- Red background highlighting can be enabled to signal good exit zones, but these generate a lot of false positives.
- To further reduce false positives, the SVIX_MA can be used to generate signals instead of the raw SVIX.
For more information on Williams' Vix Fix, which is a strategy published under public domain:
- The VIX Fix, Larry Williams, Active Trader magazine, December 2007, web.archive.org/web/...s/2014/12/VIXFix.pdf
- Fixing the VIX: An Indicator to Beat Fear, Amber Hestla-Barnhart, Journal of Technical Analysis, March 13, 2015, ssrn.com/abstract=2577930
For more information on the Stochastic Vix Fix (SVIX), published under Creative Commons:
- Replicating the CBOE VIX using a synthetic volatility index trading algorithm, Dayne Cary and Gary van Vuuren, Cogent Economics & Finance, Volume 7, 2019, Issue 1, doi.org/10.1080/23322039.2019.1641063
For a more complete indicator, see:
* Add median as an option for smoothing the SVIX.
* Better internal functions documentation.
* Correct mistake in code comment
* Extended tooltip for LookBack Period, can set 50 to transform this indicator into a market cycle indicator (instead of a volatility indicator).
* Tidier code and comments.
* Fix typo: syminfo.ticker -> syminfo.tickerid , before we fetched the chart's symbol but potentially from another data provider than current chart, now we will use the exact same data as the chart.
Dans le véritable esprit de TradingView, l'auteur de ce script l'a publié en open-source, afin que les traders puissent le comprendre et le vérifier. Bravo à l'auteur! Vous pouvez l'utiliser gratuitement, mais la réutilisation de ce code dans une publication est régie par le règlement. Vous pouvez le mettre en favori pour l'utiliser sur un graphique.
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