Synthetic VIX Indicator
The synthetic VIX shows the real price volatility index. The best market volatility indicator for MT5. Leading tool for daily technical analysis.
Description
The Synthetic VIX indicator is a market volatility indicator. It closely monitors price action changes to calculate the volatility index. We use the index value as a scale that determines the levels of price volatility.
This indicator was originally developed to track the volatility of the S&P 500. Today, you can use the Synthetic VIX to analyze forex currency pairs and other types of trading assets.
In addition, it offers the easiest demonstration of price index conditions compared to other MT5 volatility indicators. This is the perfect technical indicator for beginners. At the same time, it works well for experienced traders as well.
Synthetic VIX Calculation
SynthVIX uses the change in historical price data to assess market volatility. It uses a 20-period moving average to track changes in market volatility. Here is the formula:
Synthetic VIX value = [{Highest(Close,20) – Low}/{Highest(Close,20)}]
The indicator finds the highest closing price of the last 20 bars and then subtracts the low of the current bar. It then divides the result by the highest closing price in the last 20 periods. The result can be multiplied by 100 to scale the indicator readings (if necessary).
How to use Synthetic VIX for market volatility analysis?
The synthetic VIX is not a buy/sell signal indicator. It shows the actual state of market volatility based on the calculation of its price index.
The index value reacts in the opposite direction of the price movement. We use it to scan the trader’s sentiment when the market price reaches a certain level. Typically, the price moves up when the VIX starts to fall from 1.0. Conversely, the price intends to make a bearish move when the VIX rises from its low (0.0).
This indicator works best in sideways or confused market conditions. For example, the price fluctuates in a small range for a while and you wait for the price to break out. In such situations, the indicator helps determine the possibility and strength of a breakout setup.
Advantages of Synthetic VIX
Here is a list of benefits 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 the ideal technical analysis tool for traders making trading decisions based on market volatility levels. Apart from stocks, this indicator is equally effective for Forex currency pairs and other assets for online trading. In addition, its ease of use is a great perk for novice technical analysts and price action traders