Hey Traders!
This week, instead of a study, I want to show you how to calculate ProGo & Williams’ VIX Fix indicator, using Microsoft Excel.
I fancy the idea of combining the COT indicators (not price-derived) and price derived indicators. I believe it could give us a serious edge instead of just staring at the charts trying to make sense of the current price action.
So, today, let me introduce ProGo and VIX Fix.
ProGo
I believe the indicator was first introduced in Larry Williams’ book, Trade Stocks and Commodities With the Insiders - Secrets of the COT Report. I won’t go into details here, you can see the reasoning behind it’s effectiveness on page 125.
The formula is pretty simple. You subtract today’s close from the opening and calculate a 14 moving average.
We don’t care about the value of the indicator. All we have to do is look for divergences between the indicator and the price itself.
Price rising - ProGo declining = Bearish
Price declining - ProGo rising = Bullish
Williams’ VIX Fix
I can’t help but loving this indicator. You must be familiar with the VIX Index, and how that measures the volatility in the S&P 500. Traditionally, high VIX readings are associated with bottoms in the S&P 500. I simply apply Bollinger Bands on my VIX chart to see when “fear” is relatively high in the market.
Unfortunately, we don’t have that kind of Volatility Index for Stocks, Futures, ETFs and Currencies.
That’s where VIX Fix comes in. See, Mr Williams developed this indicator which produce the same movements as the VIX itself, without the need of the extremely complicated calculation method. On top of that, it is price-derived, so you can use it on ANY instrument.
Here’s the formula: WVF = (Highest (Close, vara) - Current Low)/(Highest (Close, vara))*100
Since it can be calculated Weekly, it would take no more than half a minute / instrument to update the data in Excel.
There, you have it. I’ll add the indicator to my database on the weekend because it looks really promising.