One of the things I’ve learned from trading Volatility 75 Index is that you must get your entry right, because if not, the draw-down that may come if you pick a wrong trade can affect your equity adversely.
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As one of the indices on the Deriv Platform, trading Volatility 75 Index can give you a good return on your investment, so it’s important that you take time to study the market before placing any trade.
As a rule of thumb, you can experiment on Boom and Crash, not on Volatility 75, because any small move or a small change in price can affect your equity adversely.
How to Trade Volatility 75 Index
There is no special way of Volatility 75 Index. The pattern of trading Vol 75 is the same as with currency pairs. Just like currency pairs, the under listed are very important when trading Vol 75:
- Support and Resistance
- Price Action
- Market Structure
How I analyze Vol 75 Index
I start analyzing Vol 75 Index from the daily chart. Analyzing from a daily chart helps me understand the market structure. Personally, I normally use the line chart to study the market, then use Candlestick chart to place trade.
When using the line chart I focus on the closing price, which enables me to understand support and resistance. Once you can spot the major and minor support and resistance in the daily, you can have an idea of the daily trend of the market, then use lower time-frame to spot a perfect entry position for your trade
Fig 1: Vol 75 Indices Line Chart
Fig 2: Vol 75 Indices Candle Stick Chart
My Top 5 rules for Vol 75
- Avoid Consolidation or ranging market
- Look out for the Supply Zone on both the 4 hour and one hour times frame.
- Always use proper risk management strategy (I mostly used 0.001 lot size)
- If you don’t know the trend of the market, don’t place any trade
Volatility moves in a zigzag form, so if you can spot the formation of a ‘W’ of ‘M’ based on the market structure you can make money from the market.
I didn’t make much profit on my first week of trading Vol 75, I started making crazy profit after 2 weeks of consistency. The only thing i did was to discover a strategy, test it on the demo, modified it, then use it on my real account.
When to Sell Volatility 75
The following conditions must be met before you place a sell on V75.
1. It Should be Overbought on the Daily Time frame:
This is very important, once you spot an overbought condition on the daily timeframe or on the 4 hour timeframe, you can go over to M15 and look for entry point. To get the overbought signal, you can use Stochastic Indicator (%K period = 1; %D = 1; Slowing = 1; price field = low/high; the style should be the same colour as the background of your chart with levels 80 for Overbought, 50 for wait and 20 for Oversold). Then add Alligator Indicator to the Stochastic Indicator window with the following parameters (Jaw Period 13; Jaw shift 8; Teeth period 8; Teeth shift 5; Lips period 5; Lips shift 3; Method- Smoothed, Apply to Median Price (HL/2); style – Jaw style – 3 pixel (blue) Teeth style – 1 pixel (red) and Lips style – 2 pixel (green)
2. After confirming that it is overbought on the higher timeframe; watch out for the formation of the of the second leg of the ‘M’ shape on the higher timeframe (that is a kind of inverted V shape formation; if you look at history of V75, you will notice that the shapes always come to play at every point) once you spot this, switch back to M15 and look for a perfect entry point.
Note: It is important that the conditions above are met, so that you can make good profit and not be scared of loses.
When to buy Volatility 75
1. It Should be Oversold on the Daily Time frame:
2. After confirming that it is oversold on the higher timeframe; watch out for the formation of the of the second leg of the ‘W’ shape on the higher timeframe, once you spot this, switch back to M15 and look for a perfect entry point and buy.
To simplify this: take a look at the shape ‘W’ if you allow the first ‘leg’ of the ‘W’ to sell down, then the second leg retest (go up), the third leg retest down again, you can enter at the last leg of the W for a buy (which is going up) if it doesn’t break the support. This has been the set up I use every day to trade V75 and the accuracy is 95%. Once you get all the confirmation right, you will minimize loses and maximize your profit.
Things you should know of when trading V75
Beware of stop loss hunt and the liquidity trap in the market; only close your trade in red when you notice a clear violation of the market structure.
Finally, trading Forex is risky, always apply proper risk management