Market Risk Indicator

26 août 2024

Introducing the easy to use Market Risk Indicator (MRI) which works well on all major Equity Indices and Large-Cap stocks.
It uses a proprietary backtested logic, and a vast improvement over the commonly used VIX indicator which is prone to manipulation via Options at illiquid strikes.

MRI works on all timeframes. My favorite timeframe is Daily.

Usage:

1. Look for deviation between risk (blue plot) and price action. Expected behavior is they move in opposite direction. If a certain instrument is not following this rule, stop.
   
2. If risk increases but price stays rangebound or also spikes; it indicates a fake move. Exit LONG and prepare SHORT once price action confirms the reversal.
   
3. If risk decreases but price stays rangebound or dips; it also indicates a fake move. Exit SHORT and prepare LONG once price action confirms the reversal.
   
4. If magnitude of risk decrease is larger than magnitude of price move up, then enter LONG once price action confirms the upside breakout.
   
5. If magnitude of risk increase is higher than magnitude of price move down, then enter SHORT once price action confirms the downside breakout.
   

Some further examples published:

NIFTY :
BANKNIFTY :

SPX500USD :
US30 :
DE30EUR :
JP225USD :
TATASTEEL :
JPM :