Does a high VIX mean the market will go down?

No. The VIX measures the size of the move option traders expect over the next 30 days, not its direction. A high VIX can occur during a sharp rally as well as a sharp decline.

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How much should I cut my position size when the VIX is elevated?

Q: How much should I cut my position size when the VIX is elevated?

Enter your normal dollar risk per trade, the current VIX level, and the VIX levels where you want to start and finish scaling down. The tool scales your suggested risk in a straight line between those two levels, down to a minimum floor you set.

The market doesn't reward being right. It rewards managing being wrong, cheaply.

Jason Parker, Founder of Trading Habits

Enter Your Normal Risk and the Current VIX

Set the VIX level where you start scaling down and the level where you cut to your minimum size. The tool scales your risk between them.

Your Result

Fill in the fields on the left and click Calculate to see your suggested size multiplier.

How this is calculated

Below your comfort threshold, this tool suggests your full normal size. Between your comfort threshold and your max threshold, it scales your size down in a straight line. At or above your max threshold, it suggests your minimum size floor.
The VIX measures the market's expected volatility over the next 30 days based on S&P 500 option prices. It does not tell you which direction the market will move, only how large a move option traders are currently pricing in.
This is a simple linear scaling rule, not a market-timing signal. It exists to keep your dollar risk roughly proportional to how much the market is currently expected to move, since a normal-size position in a high-volatility environment carries more dollar risk than the same position size in a calm one.
Default thresholds of 20 and 35 are common reference points traders use to describe calm versus stressed markets, not fixed rules. Adjust them to match your own experience and risk tolerance.
Enter the current VIX value yourself from your own data source. This tool does not fetch live market data.

Risk & liability disclaimer: This calculator produces a mathematical estimate based on the numbers you enter. It is not financial advice and does not guarantee any trading outcome. Trading involves risk of loss, and past results do not predict future results. Trading Habits is not a broker-dealer, registered investment adviser, or tax professional, and is not affiliated with any broker, exchange, or data provider. We do not guarantee this tool is error-free or suitable for your situation. Always verify results independently and consult a licensed professional before making any trading or financial decision. You could lose some or all of the capital you trade with.

How much should I cut my position size when the VIX is elevated?

Enter Your Normal Risk and the Current VIX

Your Result

How this is calculated

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