Regular readers know that my favorite day-trading setup involves use of 2 minute chart of the major indices with a VIX overlay . . generating trade signals which I have dubbed the VIXEN. This setup works effectively with many ETFs and stocks, although I typically limit my exposure to SSO, TLT and the Qs just because of signal reliability.
Traders who use the VIXEN also know that the VIX/majors crosses “float” so that looking at the charts after the fact gives a somewhat skewed view of the actual VIX cross. The time period also affects the precise signal point . . 1 minute bars generate a signal quicker than a 5 minute bar although you also increase the risk of a false entry.
I prefer 2 minute bars as a trade off between premature and late, after the fact signals, while some of my trader buddies use 3 minute bars. The VIXEN is a fractal phenomenon although I prefer it as a day-trading tactic. Impatient day-traders will be frustrated with the VIXEN because there are days when she doesn’t appear at all , while on many days only one or 2 signals will fire. Nevertheless, these are very high probability setups and since my guiding mantra is “Don’t lose money”, it’s a key component of my trading plan.
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