Synthetic VIX Indicator
Synthetic VIX shows the actual price volatility index. The best market volatility indicator for MT4. A leading tool for daily technical analysis.
Description
The Synthetic VIX Indicator is a market volatility meter. It closely monitors the price-action changes for calculating the volatility index. We use the index value as a scale that determines the price volatility levels.
Initially, this indicator was developed to track the volatility level of the S&P 500. Today, you can use Synthetic VIX for analyzing forex currency pairs and other types of trading assets.
Furthermore, it offers the easiest demonstration of price index states compared to other MT4 volatility indicators. It an ideal technical indicator for beginners. At the same time, it works well for the experienced traders as well.
Synthetic VIX Calculation
SynthVIX uses the variation of historical price data to estimate the market volatility. It applies a 22-period MA for monitoring the changes in market volatility. Here is the formula:
Synthetic VIX value = [{Highest(Close,22) – Low}/{Highest(Close,22)}]
The indicator finds the highest close price of the last 22 bars and then subtracts the current bar’s low. Next, it divides the result by the highest close price of the last 22-periods. The result can be multiplied by 100 to scale the indicator readings (if required).
How to use Synthetic VIX for market volatility analysis?
Synthetic VIX is not a buy/sell signal indicator. It shows the actual condition of the market volatility based on its price index calculation.
The value of the index reacts quite opposite to the price movement direction. We apply it to scan the trader’s sentiment when the market price reaches a certain extent. Generally, the price moves higher when the VIX starts to fall from 1.0. Contrarily, the price intends for a bearish move when the VIX rises from its lowest value (0.0).
This indicator works best in sidelined or confusing states of the market. For example, the price is roaming within a short range for a while, and you’re waiting for a price breakout. In such situations, indicator helps you to determine the possibility and the strength of the breakout setup.
Advantages of Synthetic VIX
Here is the list of advantages of the Synthetic VIX volatility indicator:
- Shows the real-time volatility index of the price
- Demonstrates buyers and sellers sentiment on all types of market conditions
- Helps to identify the price breakout and swinging patterns
- Less complicated and suitable for beginners
- Can be merged with any trading strategies
Conclusion
Synthetic VIX is an ideal technical analysis tool for traders who make trading decisions considering the market volatility levels. Besides stocks, this indicator is equally effective for Forex currency pairs and other online trading assets. Also, its simplicity of use offers a great privilege for the newbie technical analysts and price-action traders.