Mid-Term Trade Examples
It's simple and it's
Great return with
only a few trades.
The following illustrates the basic principles behind MarketVolume®'s
analysis. Chart 1 shows the relationship between index reversals and surges
in the volume moving average (VMA) in 2005.
||Relationship between volume
moving average (VMA) surges and index reversal points. S&P 500
index. January to December 2005.
The Buy/Sell points marked on Chart 1 were generated based on
index volume surges. These points are referenced in our
PVO Oscillator History using the following settings:
- Index: S&P 500;
- Fast VMA: 2-day VMA;
- Slow VMA: 25-day VMA;
- Selling threshold: Go short if during a price advance the
fast VMA rises 17% or more above the slow VMA;
- Buying threshold: Go long if during a price decline the
fast VMA rises 15% or more above the slow VMA.
A significant divergence between the fast and the slow VMA
indicates a high-magnitude volume surge. Our historical research indicates that
(1) the market has a tendency to react to high volume surges by changing its
trend and that (2) the greater the magnitude and the duration of a volume surge,
the greater the likelihood of a trend reversal occurring and the stronger the
reversal will likely be. Not all trades generated in this way are however
profitable. For instance, the decision to go short at point I resulted in a loss
of 3.28%. Despite this, in 2005 this strategy of trading the S&P 500 delivered a
16% compound return (versus an approximate 2% buy & hold return over the same
The potential profit from trading volume surges may be
increased substantially by selecting an appropriate trading vehicle. Table 1
shows the returns that have could have been achieved in 2005 had the
volume-based trading signals (generated on the S&P 500) been applied to NASDAQ
100 Dynamic funds, the QQQQ, and to QQQQ options.
|NASDAQ 100 Dynamic Funds
|QQQQ Options (summary return)
Our indicators built on our proprietary technologies and deliver a profitable
strategy with minimum risk.
|Disclaimer: The chart
example is intended for educational purposes only - it does not
constitute trading advice, nor does it make or imply any market trend