VIX Fix VIX Strategy by lm_h

By ChrisMoody

Performance Metrics

Description

=========================================================================ATTRIBUTION**=========================================================================**This strategy is a heavily modified version of ChrisMoody's excellent interpretation of the VIX Fix by Larry Williams.Original script: =========================================================================MOTIVATION**=========================================================================**My primary motivation for these modifications was to create a profitable strategy based on the Williams VIX Fix (WVF) that also effectively captures strong upward market moves. While I initially built this around the S&P 500, experimenting with different symbols led me to my absolute favorite underlying asset for this script: the VIX itself.Applying a volatility indicator to a volatility index might sound counterintuitive at first. However, it makes perfect sense: the VIX is structurally mean-reverting and lacks a long-term directional trend. Because of this, the WVF formula acts as an exceptional tool for timing these sharp, mean-reverting volatility spikes.Some people argue that volatility is usually low, and that speculating on higher volatility – as this indicator does when it buys – goes against the market’s nature. In theory, this view has some merit: over long periods, realized and implied volatility tend to fluctuate around a moderate average rather than staying elevated all the time. In practice, however, markets regularly go through distinct high- and low-volatility regimes, and volatility spikes are a recurring feature rather than a rare exception.Looking at historical VIX data since 1990, there has never been a multi-year period without the index rising well above commonly used “stress” levels such as 20. From that perspective, betting on higher volatility from unusually calm conditions can be more intuitive than passively betting on the underlying index itself.=========================================================================KEY CHANGES & FEATURES**=========================================================================**Expanded the core WVF formula: In addition to the original WVF (now wvfh), I introduced a mirrored component (wvfl) designed to capture aggressive bearish volatility. Together, they form a comprehensive, symmetrical WVF.Adapted the ranges & bands: I kept the percentile-based ranges and the Bollinger Bands of the WVF, but shifted their source to the newly modified, combined WVF.Dynamic Moving Averages: Integrated MAs applied to the WVF, using factorized MAs of the wvfh and wvfl components to generate precise entry and exit thresholds.Momentum confirmation: Added MACD integration to confirm entries, which is especially useful for cross-timeframe alignment.Strategy conversion: Transformed the indicator into a fully functional strategy featuring explicit long/short rules and a straightforward Stop-Loss mechanism.Time-based exits: Incorporated a fixed-date sell function (simulating options expiration) that automatically closes trades after a defined holding period.Price-level filters: Engineered Buy and Sell stop-level filters to prevent entries at unfavorable extremes. (Toggle these off to see how many losing long entries on the VIX they prevent!).Code cleanup: The Pine Script code was heavily structured and commented with the assistance of AI to ensure readability.=========================================================================HOW I USE IT**=========================================================================**The default settings reflect my personal preference for trading VIX Futures on the 4-hour timeframe. I consider this setup particularly powerful when applied to the VIX as a structural hedge against broader market drawdowns.If you plan to use this on other symbols (like standard equities or indices), you will likely need to adjust the parameters—especially the Buy and Sell stop levels.Ultimately, this strategy can be an excellent addition to a passive, index-based portfolio. It serves well as an active crash-hedging overlay, where a small percentage of your capital is systematically deployed to profit from fear-induced market drops and volatility expansions.=========================================================================DISCLAIMER**=========================================================================**This script is provided for informational and educational purposes only and does not constitute financial, investment, trading, or tax advice. It does not take into account your personal circumstances, objectives, or risk tolerance.Trading involves substantial risk and can result in the loss of all invested capital. Use at your own risk. The author accepts no liability for any financial losses or other damages arising from the use of, or reliance on, this script or its outputs.=========================================================================VIX Fix - Hedging Strategy © lm_h=========================================================================

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