Trading Markets states that
“The proper way to use the VIX is to look at where it is today relative to its 10 day simple moving average. The higher it is above the 10 day moving average, the greater the likelihood the market is oversold and a rally is near. On the opposite side, the lower it is below the 10 day moving average, the more the market is overbought and likely to move sideways-to-down in the near future.“
This wisdom is further distilled into what TradingMarkets calls The Trading Markets 5% Rul e: “Do not buy stocks (or the market) anytime the VIX is 5% below its [10 day simple] moving average.”
The Same strategy has been applied to Nifty to find out the next day result after breaking either above 5%(Buy Signal) or Below -5% and the strategy is to check the Next day behaiour of Nifty with repect to the Signal. And if VIX falls between -5% to 5% then the very next day it is declared as a Dont Trade Day.
Samples are taken from 01-Jan-2009 to 13-Mar-2009(47 Trading Sessions) to test the strategy and it found that out of 47 trading sessions Vix has given a buy/sell signal on 16 trading sessions. And out of 16 trading signals, 11 Signals are found accurate with big moves in nifty counting from day high and 5 trading signals are Found inaccurate with Big moves.
Vix 5% rule is implemented in google spreadsheet for your view . And for recent signals from vix you are recommended to check out the link.