March 5, 2024

A Comprehensive Guide to Volatility 75 Index on MT4

March 5, 2024

Metatrader 4
Content:

 

The Volatility 75 Index is a synthetic Index that measures the volatility of financial markets. Since it’s a synthetic Index it isn’t influenced by the market sentiments, economic events, and geopolitical tensions. Volatility 75 Index reflects volatility levels, which makes it easier for traders to predict the market.

 

In this guide, you’ll get to know about the Volatility 75 Index comprehensively. You’ll learn some of the important aspects of the Volatility 75 Index, trading platforms like MT4, and brokers such as Deriv and in the end, you’ll figure out how to trade the Volatility 75 index the right way. So, let’s explore the potential of trading volatility 75 Index on MT4!

 

What is the Volatility 75 Index?

The Volatility 75 Index (VIX75), also known as a fear Index, measures market fear, stress, and risks.

 

When there is a high VIX, the market fear is considered to be quite high. In such a scenario, traders experience a sharp increase in the Volatility index after a market crash. An increase in VIX results in a drop in the S&P500 price. On the other hand, when the VIX falls and the S&P price goes up, the traders tend to sell or exit the market.

 

Therefore, VIX75 gives us a good idea of which way the market is expected to go. It’s an important tool for investors that helps them measure the overall mood of the market.

 

Understanding Market Volatility

Volatility is an up-and-down market movement.

 

Let’s assume you expect a stock to be at one price, but over a short period, it drastically goes up or down. Calculated as a standard deviation from the expectation, such movements reflect volatility.

 

If a position goes through remarkable changes in value, we call this position highly volatile. Vice versa, low volatility means the position is stable. High Volatility brings uncertainty and scares people. But at the same time, highly volatile positions can generate much profit if you’re willing to take risks.

 

Now, you might be wondering, how to determine stock volatility. It’s simple, Trace the trend. Remember that volatility equals swings. You need to go through the Volatility Index chart and analyze the severity of a stock market price fluctuation. The more violent the ups and downs of a stock, the more volatile it is.

 

Volatility realizes whether a stock fits your portfolio or not. So, it’s up to you to decide whether to take an extreme ride or an easy slide.

 

After getting a good understanding of Market Volatility, you will get the concept of Cboe VIX very well. So let’s discover about it further.

 

Cboe Volatility Index

The Cboe (Chicago Board Options Exchange) Volatility Index, as it’s officially called is widely reported by financial media as the benchmark of volatility. You’ll also hear financial news outlets refer to it as the “fear gauge” but for our purposes, we’ll refer to it as the VIX Index.

 

The VIX Index Indicates the degree or expected level of uncertainty in the marketplace. Specifically, the VIX index measures the 30-day expected volatility of the S&P 500 Index by using Cboe-listed options on the S&P 500 Index as inputs. You may know these as SPX options.

 

The VIX Index is expressed in percentage terms as an annualized one standard deviation move of returns on the S&P 500 Index. Let’s unpack that- The VIX Index calculation uses SPX option prices. The prices investors pay for options typically reflect how much the underlying asset (In this case the S&P 500) is expected to move over a given time frame.

 

Let’s take a look at how the VIX Index is used.

 

It is most widely used as a gauge or indicator of the future levels of the market. It’s important to remember the VIX Index itself is not directly tradable. Cboe lists tradable VIX futures and options for more sophisticated investors who are seeking expected volatility exposures.

A Comprehensive Guide to Volatility 75 Index on MT4

What is MetaTrader 4 (MT4) and How Do You Use It?

MetaTrader (MT4) is simply a trading platform developed by MetaQuotes in 2005.

 

MT4 helps traders view real-time currency prices, open trades, and get fundamental and technical analysis. Similarly, the MT4 platform is used by brokers to reach a broader audience.

 

MetaTrader 4 is highly customizable and user-friendly, even beginners can spot a breakout pattern in its customizable charts.

 

MT4 is significantly useful for mechanical traders as it allows them to plug in their EAs on this platform. This strategy makes it easy for mechanical traders to track trade opportunities.

 

The MT4 Platform is unique because it can’t be accessed through a website. Traders would have to install the platform on their systems or mobile phones to gain access to their trades and currency pairs.

 

How to use the MT4 Platform?

You need to follow a couple of steps to learn how to use MT4.

 

Step 1: Set up your MT4 Account

To set up your MT4 account, you’ll need to download and install MT4.exe and fill in the account details.

 

Step 2: Keep a record of your account details

In the second step, you’ll need to keep a copy of your account login details before exiting the registration process.

 

These steps can help you set up your MT4 account and get started with it!

 

MT4 platform has the feature of running a demo account. So, we encourage you to begin with a demo trading first. This strategy can help you experience the platform without putting your capital at risk.

 

What You Need to Know About Lot Size

 

In MT4, a lot is the unit that enables you to buy or sell currencies. There are different lot sizes. For example, if you have to buy 10,000 units of any currency, you can use the mini lot size and based on this strategy you earn profit and loss.

 

There are four types of lot sizes:

1.    Standard lot size (1.0)

1 standard lot = 100,000 units of any currency you’re buying or selling

It means if you open a trade with a lot size of 1.0 you’re going to buy 100,000 units of that currency.

For instance, if you open a buy trade on USD/JPY with one standard lot size, you’re buying 100,000 units of USD. So when you use 1 standard lot size, every pip gives you Ten dollars.

 

2.    Mini lot size (0.10)

1 mini lot size = 10,000 units

It means that if you’re opening a trade of a lot size of 0.10, you’re buying 10,000 units of that currency.

 

3.    Micro lot size (0.01)

1 micro lot size = 1000 units

It means that if you’re opening a trade of a lot size of 0.01, you’re buying 1,000 units of that currency.

For example, if you’re willing to trade on GBP/JPY with one micro lot size, you’re buying 1000 units of GBP. So when you use 1 micro lot size, every pip gives you 0.10 dollars.

 

4.    nano lot size (0.001)

1 nano lot size = 100 units

It means that if you’re open a trade of a lot size of 0.001, you’re buying 100 units of that currency.

 

Volatility 75 Index Deriv Account (Broker)

Deriv brokers provide a wide range of financial instruments for trading including forex, stocks, cryptocurrencies, commodities, and synthetic indices.

 

Deriv is a regulated and legit broker. It is regulated by MFSA (Malta), LFSA (Malaysia), BVIFSC (British Virgin Island), and VFSC (Vanuatu).

 

The VIX 75 has a high trading volume. It means many traders actively participate in the market. This liquidity in the market makes it easy for traders to open trades or exit quickly.

 

But at the same time, VIX 75 carries a higher risk compared to other lower volatility indices. It means there are higher chances of losing more money. Therefore, VIX is best suited for experienced traders who have practiced enough and mastered the skills in trading.

 

However, if you’re a newbie and you want to trade VIX 75 then a simple strategy using the Relative Strength Index (RSI) might be a good option for you.

 

On the other hand, if you’re an experienced trader, you can go for more complex strategies that involve tools like Bollinger Bands, Moving averages, and Fibonacci retracement to identify the best possible entry and exit points.

 

Volatility 75 Index

How to Trade the Volatility 75 Index on MT4 the right way.

 

The first thing you need to understand is the nature of the assets

When we talk about the asset’s nature, it’s about the fact that these assets are not currencies or any economic assets. So, the way these assets behave is not affected by economic news, events, or any other economic factor. That’s why, these are known as synthetic ETFs.

 

You need to know that there are real indices like Nasdaq, but we also have synthetic indices which are referred to as volatility indices. These Volatility indices are generally created by brokers or you can also create your own synthetic ETF.

 

These synthetic indices are going to imitate the market in real-time. As these assets only imitate the real market, so there’s no psychology involved. So, when it comes to trading VIX 75 you’re a free trader to apply any particular system unlike trading real indices where you’re bound to psychology-based approaches.

 

For example, the price patterns in real indices are based on the human mind or players (Buyers & Sellers). But, in the case of VIX 75, you have the freedom to approach the market even in a way that doesn’t involve psychology. That’s why you can apply indicators and it works very well!

 

The next important thing that works really well in VIX 75 trading is that it’s all about the momentum.

 

It means Volatility 75 Index trading can follow trends for a long period and that’s what helps the traders to get the most out of it. For example, if there’s an upward momentum, then this trend is going to continue for a long time and you can open a long position during this trend to get a good profit from it.

 

Remember, when you’re trading VIX 75, your approach needs to be clear.

 

You can approach it in a genuine or aggressive way. So, when you opt for the genuine strategy, you have a fixed risk reward or a fixed percentage that you’re risking and you apply those small lot sizes. That’s the way we also trade other assets like stocks or currencies and other indices.

 

But, when you opt for the aggressive way, it is important to note that you only need to fund your account with a particular amount that you’re willing to risk. For example, You funded your VIX 75 account with 15$ (That’s the amount you want to risk). Then you may open a trade. So, in case you lose the trade, remember that you’re going to lose the entire amount.

 

But if you succeed in your trade, you’ll make a good profit like up to 10x depending upon how patient you are. It means you can make up to 150$ from your invested amount which is 15$ in this case.

 

So, it is really important to have a well-defined strategy and you’re opening your trade at the right possible time and at a great point based on your strategy.

 

Conclusion

To wrap things up, trading the Volatility 75 Index on the MT4 platform can be helpful for traders looking to take advantage of changes in the market. Since it shows how nervous or uncertain people are about the market, it can offer some exciting chances for investors who like to take risks.

 

But remember, the Volatility 75 Index is best suited for highly experienced traders who are comfortable with taking higher risks. This type of trading isn’t recommended for beginners or those individuals who opt for a more cautious approach.

Ready to start Online Trading? Open an account today        

Join CMTrading, the largest and best-performing broker in Africa, and discover more opportunities with an award-winning broker. Register here to get started            

Follow us on Facebook, Instagram, LinkedIn, Twitter, and YouTube 

Disclaimer
Trading involves a significant risk of loss and is not suitable for all investors. It’s important to understand the risks and seek advice from an independent financial advisor if necessary.

The information provided here does not constitute investment advice.

Facebook
Twitter
LinkedIn
WhatsApp
Email

Content:

Follow us on:

Start Trading Now!

Recent Posts

Gold
How To Invest In Gold In South Africa

  Investments in precious metals, particularly gold, tend to keep their value in the financial markets for extended periods. They thereby offer commodity merchants a permanent safe haven.   Beyond its flashy exterior, gold has

Read More »
Trade Schools
What Are The Best Trade Schools In South Africa

  Technical Vocational Education and Training (TVET colleges) or Trade schools, which offer specialized education in a range of skilled trades, are essential parts of South Africa’s educational system. These educational establishments have a functional,

Read More »

Leaving so Soon?

Register now and get $300 extra using promo code CMT300

T&C Apply | Min Deposit $300 | Max. Reward $300