Generally, the Volatility Index (VIX)
is in an uptrend or downtrend constantly, and this feature makes it challenging
to pinpoint extremes or cycles. Percent
Price Oscillator (PPO) is applied to detrend the VIX.
The Exponential Moving Average (EMA)
is another type of moving average. More
weight on the latest data is adopted to compute its value. Therefore, EMA is more sensitive to more recent
price changes than the well-known simple moving average (SMA). It is tapped to derive PPO and other
indicators.
PPO (10,50,1) is calculated by the
difference between the 10-day EMA and the 50-day EMA, divided by the 50-day
EMA. Its value serves as the difference
in percentage between the 10-day EMA and the 50-day EMA.
PPO (10,50,1) has a positive value
when the VIX 10-day EMA exceeds the VIX 50-day EMA, likewise. Investors can
customize the PPO by modifying the combination of exponential moving averages.
Lets’ use example PPO (20,50,1). The parameter 1 is fixed, which is utilized to
merge the signal line moving average with the index VIX.
It requires
some technical tips to further demonstrate the VIX as a PPO (10,50,1) that can
compare with the underlying stock index S&P 500. Investors could follow the
listed procedures and steps illustrated in the following link: http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:volatility_index to come up with chart by working on the platform stockcharts.com. To find more detailed information about this
procedure, the website stockcharts.com definitely provides a rich source.
Thanks for your visiting and reading,
you can read more about Volatility Index (VIX) here:
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