Now that we have the entire algorithm, rules of entry, exit and continuation trading out of the way let’s move onto some of the additional filters you will check first before you enter the trades.
The first thing you will check each trading day will be the $EVZ level. You need a closing level of 8 (now changed to 7) from the previous trading day to determine your trading strategy for the trade.
The $EVZ level is signaling how much currency volatility there is in the marketplace. That means are people buying/selling currency enough in the world to support a trend. If people are selling equities and buying precious metals they are going to need to exchange currencies to make this happen.
This is the significance of the $EVZ level. If the level is lower than 8 that means there is not much buying and selling of currencies so most currencies are not going to trend very far in one direction for very long, they will just move a little and return to their original average position.
If the $EVZ level is below 8 ( now changed to 7 ) this equates to a dead market. In a dead market you can opt out of trading currencies all together OR you can take entire profit at the 1 ATR level of your trade.
If the level is 8 (7) or above you will just trade as normal because there will be enough volatility in the market to allow the price to trend in one direction for an unspecified amount of time.
The last part is News Avoidance while you are trading.
In Forex, when economic news is announced, currencies can fly unexpectedly in one direction or the other whether the news is good or bad. So in the VP method, we just flat out avoid these times.
If you are currently in a trade and tomorrow there is an announcement such as Interest Rate Changes or Non-Farm Payrolls, you will need to consider if you need to exit the trade and consult the game plan. I go into detail about News Avoidance here.