Williams VIX Fix

TL;DR. (highest close of the last n bars − this bar's low) / that highest close × 100. It rises in a sell-off and spikes in a panic, the way the VIX does, so its peaks tend to sit near fearful lows. It measures how far price has fallen; it does not forecast the turn.

#What it measures

• The depth of the recent fall. How far the bar's low is below the best close of the window, in percent of that close. 0 means the low touched that close; 5 means it sits 5% below.
• Fear on markets without a VIX. Larry Williams built it so a futures contract, a stock or a currency could have its own fear gauge, computed from its own bars.
• One-sided. It only reads falls from a high. A rally pushes it toward 0 and keeps it there.

#Formula

#Inputs in AlgoLift

#Recommended periods

• 10 to 15 (fast): Short pullbacks on intraday bars.
• 22 (default): Williams' setting.
• 50 to 100 (slow): Only the deep drawdowns register.

#Outputs in AlgoLift

#How to read it

• A spike well above its recent range: a sharp, fearful fall. On equity indexes these spikes have tended to cluster near short-term lows.
• Falling back from a spike: the selling is easing. Many traders wait for this rather than buying the spike itself.
• Near 0 for a long stretch: price keeps closing near its highs. A calm uptrend.
• Against its own history: what counts as a spike depends on the market and timeframe. Compare it with its own average or percentile, not a fixed number.

#Best in, worst in

Best in mean-reversion longs on markets that tend to recover from sharp drops, such as equity index futures, as the measure of "this fall is unusually deep".

Worst in markets in a steady decline, where the line stays high for weeks and every spike is followed by another.

#Three setups

#1. Spike above its own band

Compute the line's 20-bar average and standard deviation with the Std/Z-Score Modifier, and enter long when VIX Fix is more than 2 deviations above its average and then turns down (its value below the value 1 bar ago, through a Bars Ago Modifier).

#2. Percentile fear filter

Rank the line over the last 100 bars with the Percentile Rank Modifier and allow a pullback-buying rule only when the rank is above 90, so the strategy buys only the deeper dips.

#3. Fear exit for shorts

Hold a short until VIX Fix spikes above its 50-bar high (a Rolling Min/Max Modifier), then exit through Set Exit Condition: the panic that rewards a short is also where shorts get squeezed.

#Common mistakes

• Reading it as a two-sided oscillator. It has no overbought side. A low reading only means price is near its highs.
• Buying the first spike. The first spike of a crash is rarely the last. Wait for the line to turn or add a price confirmation.
• Tuning the spike threshold to one market's past. A threshold fitted to one year of one instrument has found that year's crashes (overfitting in trading).