Trend Trading Successfully in Low Volatility Markets

Traders Magazine Online News, August 31, 2017

PIP Hunters

The first half of 2017 has seen low volatility become a major feature across financial markets. Indeed, the VIX has posted the lowest close since 1993 following a record run of low closes. We’ve also witnessed the lowest level of volatility in three years across G10 major currencies; and likewise, volatility in oil prices and U.S. Treasury has proved worryingly low.

Such scenarios present difficult trading conditions, none more so than for trend traders who are questioning, and rightly so, which technical indicators they can rely on. Many studies have shown VIX and S&P500 responding differently to their usual correlating pattern, and moving in opposite directions since the start of 2017, as is clear in the graph below. Therefore, we need to adapt along with the changing conditions, and can now use this as an indicator for the movement of S&P over the next 6 months.

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