Definitions:
- Bull Market Phase - Market is above 200 day simple moving average.
- Bear Market Phase - Market is below 200 day simple moving average.
- VIX Regimes: 0-15 (low volatility), 15-30, 30-45, 45-60 (high volatility)
- Market is in Bull Market phase.
- Go long when market transitions from previous VIX regime to new regime.
- Exit long when market transitions from current VIX regime to next regime.
- Market is in Bear Market phase.
- Go short when market transitions from previous VIX regime to new regime.
- Exit short when market transitions from current VIX regime to next regime.
- Test Duration: 1996 t0 Current
- Friction less results i.e., no commissions, no slippage.
- Long only trades.
Results Analysis - Bull Markets:
- Profitable in all 3 VIX regimes. The Trades category provides an idea of how many times the market entered into a particular volatility range.
- The Win% is highest in VIX range 30-45. But the number of time market entered into that VIX range is relatively less.
- Average Win/Loss Ratio and Average trade returns are highest in VIX range 0-15. I wonder if it is because of low volatility anomaly in markets?
Results Analysis - Bear Markets:
- As expected, results show bear markets are more volatile than bull markets. Unlike bull markets, bear markets entered VIX 45-60 range multiple times.
- Long trades are profitable in the volatility regime 30-45. Not sure Why?
- Another is high average win/loss ratio in volatility regime 0-15. Why?
Note: The above is not a system nor it is a recommendation. Just a study of one of the market characteristics.
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