Recently India VIX had returned from the peak volatility of 36 during 28th august down to sub 20 levels.Now very low volatility is prevailing in our Indian markets which generally indicates compressed markets.
Why Trend Followers should pay attention to India VIX?
Trend followers, traditionally benefit from increasing volatility while other strategy player experience losses. History reveals movement from low volatility to higher volatility produces outsized trend following returns.
Movements in volatility and trend following performance are heavily correlated. Traders can use this insight to time entry, or to add money into Trend Following Strategy by looking at the volatility Index. High volatility periods offer opportunities to lighten up or decrease exposure in Trend Following strategies as movement from high to low volatility are times of losses for these types of strategies.
It is advisable to take Volatility as one of the parameters in your indicator to timing the entry for better yields.