How to trade Nifty VIX?

What is volatility index VIX?

Before learning the volatility index lets understand  what is volatility. So volatility is the amount by which the price fluctuates in a period of time. It is measured by some mathematical calculations.

How volatility is measured?

In NSE, there is a special index for measuring the volatility, it is India VIX. One can even see the charts of VIX on real time basis. However there are technical indicators, that can be used to measure volatility in the market. Bollinger bands and Average True Range (ATR)  are most commonly used to keep track of price fluctuations and the volatility.

The India VIX uses the implied volatility of NSE NIFTY options and is helpful in predicting overall market volatility for the next 30 days.

A falling VIX means that there is lower uncertainty and market confidence is high and most of the time direction of trend is clear. A rising VIX shows there is a lot of uncertainty in the markets and price action is expected to be very volatile or sensitive in the coming days.