WHY TRADERS LOSE WHEN TRADING VOLATILITY 75 INDEX

Yes, traders can absolutely incur losses when trading the Volatility 75 Index (VIX) or other similarly erratic financial instruments. Trading inherently involves risk, and the VIX is renowned for its wild price fluctuations and rapid changes.

If trades do not proceed as planned, traders may lose money, particularly if they lack a clear strategy, effective risk management, or sufficient expertise to navigate such turbulent markets.

When using the Volatility 75 Index, there exists a chance of making money but also a substantial chance of incurring losses.

This piece seeks to explain to you why traders lose when trading volatility 75 index and what to do to curb it.

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What Is the Volatility 75 Index Really All About?

The Volatility 75 Index can be understood as a dynamic indicator that continually assesses real-time market risk. Much like other trading pairs, it strictly adheres to a technical pattern, affording traders the opportunity to immerse themselves in Volatility 75 Index trading through the application of technical analysis.

This particular index notably lacks significant foundational drivers that are typically present in financial instruments, such as monetary policy, interest rates, or the consumer price index.

Given its distinct proclivity for high volatility, I strongly advocate exercising caution and restraint when contemplating involvement in trading activities related to the VIX75. It is of paramount importance that you possess a comprehensive grasp of technical intricacies and maintain an equity position robust enough to effectively withstand and navigate the inherent risks associated with this index.

As for the minimum equity requisite for Volatility 75 Index trading, it’s contingent upon your specific trading style.

Should you favor the utilization of lower lot sizes, such as 0.001 and 0.002, an account harboring an equity balance in excess of $100 is deemed appropriate.

Nevertheless, if your strategic approach leans toward scalping the Volatility 75 with more substantial lot sizes to harness swift pips, it is judicious to consider maintaining a recommended minimum equity of $1000.

Main Reasons Why Traders Lose When Trading Volatility 75 Index? 

1. Loses Due to High Volatility

The Volatility 75 Index is known for its extreme price swings. While high volatility can create trading opportunities, it also carries a higher risk of losses, as price movements can be rapid and unpredictable.

2. Lack of Experience Makes a Trader Lose His or Her Investment

Many traders may not have sufficient experience or knowledge to effectively navigate highly volatile markets. Inexperienced traders may make impulsive decisions, leading to losses.

3. Making use of Leverage

Some traders use high leverage when trading the Volatility 75 Index, which can magnify both gains and losses. While leverage can amplify profits, it can also lead to significant losses if trades move against the trader.

4. Emotional Trading

Volatile markets can trigger emotional responses in traders, such as fear or greed. Emotional trading can result in impulsive decisions and poor risk management, increasing the likelihood of losses.

5. Inadequate Risk Management

Effective risk management is crucial in volatile markets. Traders who do not implement proper stop-loss orders or position-sizing strategies may incur substantial losses.

6. Not Employing a Good Strategy

Trading without a well-defined strategy can be risky, especially in volatile markets. Traders should have a clear trading plan with entry and exit points, as well as risk management rules.

7. News and Events

Volatile markets can be influenced by unexpected news events or economic releases. Traders who do not stay informed and adapt to changing market conditions may face losses.

8. Overtrading can Also Be a Problem

Some traders may be tempted to trade excessively in highly volatile markets, leading to overexposure and increased risk.

9. Market Manipulation

In some cases, highly volatile markets can be susceptible to market manipulation or rapid price spikes, which can result in losses for traders.

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Volatility 75 Index Trading Strategies to Stop Loses (25 Ways)

1. Don’t trade when Bollinger Bands (BB) and the Alligator indicator are very active, but be ready for opportunities.
2. If Bollinger Bands widen, check the potential price direction. Wait for a fractal pattern and think about a long trade.
3. Understanding the market trend is crucial.
4. For price action trading, wait for a candle to touch the upper or lower Bollinger Band.
5. If it touches the upper band and a fractal pattern appears, think about a short buy trade. If the candle touches the lower band, wait for a fractal and think about a short sell trade.
6. The Alligator indicator helps identify the direction for long trades.
7. Always set your stop loss at the band edges and take profit at the middle band.
8. Use Technical Indicators like RSI and Moving Averages to confirm trade setups.
9. Diversify Your Portfolio by spreading your investments across different assets to reduce risk.
10. Implement Risk Management by only risking a small portion of your capital on each trade.
11. Define clear goals by determining profit targets and exit points in advance, and stick to your plan.
12. Stay informed by keeping updated on economic news that can impact market volatility.
13. Conduct backtesting to test your strategies on historical data before live trading.
14. Avoid overtrading; instead, follow a well-defined plan.
15. Consider using a Trailing Stop-Loss to protect profits as a trade moves in your favor.
16. Monitor economic calendars to stay aware of events affecting market sentiment.
17. Practice patience by waiting for high-probability setups; avoid forcing trades.
18. Invest time in continuous learning to improve your trading skills.
19. Trade during less volatile times to consider quieter market hours if extreme volatility is uncomfortable.
20. Gain confidence and refine your strategies through demo trading.
21. Maintain a trading journal to record decisions and emotions for self-improvement.
22. Seek professional guidance by consulting with professional traders or advisors for help.
23. Develop psychological discipline to control emotions and avoid impulsive decisions.
24. Periodically review your strategies to ensure they adapt to changing market conditions.
25. Avoid revenge trading, which involves chasing losses with impulsive trades.

Utilize expert advisors, which are automated tools aligned with your strategies.

In Summary

Trading the volatile Volatility 75 Index (VIX) poses loss risks due to high volatility and inexperience. Mitigate risks by avoiding active indicators, diversifying, managing risk, and staying informed. Backtesting, avoiding overtrading, and patience are safeguards. Learn continuously, trade during calmer times, and use demo accounts. Keep a journal, seek guidance, control emotions, and review strategies. Avoid revenge trading and consider expert advisors for success.

 

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Referral links;

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Deriv offers complex derivatives, such as options and contracts for difference (“CFDs”). These products may not be suitable for all clients, and trading them puts you at risk. Please make sure that you understand the following risks before trading Deriv products: a) you may lose some or all of the money you invest in the trade, b) if your trade involves currency conversion, exchange rates will affect your profit and loss. You should never trade with borrowed money or with money that you cannot afford to lose.