S&P 500:
An Example of a Trading
System using the SBV Oscillator
February 8, 2008
+14% in 2 months
This week SBV chart example is a
continuation of previous
example on
February 1, 2008. In this week's example we use the same settings that were
already used by showing the consistency of our
trading system over the long period of time.
This week SBV chart example is based on the 60-day SBV(20)
S&P 500 chart.
|
Chart 1. Relationship between the SBV oscillator and
index reversal points. S&P 500 index. 60-day view. 1 bar = 1 hour. SBV(20) |
 |
It's
Simple and profitable
In our trading example, we applied the following
simple system which is based on our SBV indicator:
-
Once the SBV indicator declines below minus 20% (the
indicator will now show green), we enter a short position (if we are
not already short);
-
Once the SBV indicator advances above minus 20% (after having
been below that level), we will enter a long position (the indicator
still shows green);
-
Once the SBV indicator rallies above plus 20% (the indicator
will now show red), we enter a long position (if we are not already
long);
-
Once the SBV indicator declines below plus 20% (after having
been above that level), we will enter a short position (the indicator
still shows red);
-
If the SBV dropped into negative territory and started to rise without
hitting the signal line, close the short position when the SBV is back in
the positive territory, and stay in cash until a new buy signal is
generated. Vise versa for a long position.
In our Market outlook on January 23,2008 we have mentioned:
"A note for those who use 60-day SBV(20) simple
trading system: it is recommended to reduce the negative level from minus 20% to
minus 50-60% after such a prolonged buying volume accumulation. An additional
rule that may increase an efficiency of the system should now include - 'If you
see the SBV below minus 20% for more then 8-10 session in a row, then lower the
signal line from minus 20 to minus 50-60%"
This is one of the ways to improve the system. When the market is heading in
one direction for a prolonged period of time and we start to see the buying or
selling volume accumulation growing to big sizes (big red or green SBV areas) it
is logical to expect a sharper and a stronger reversal than usual. In this case
it could be a little late to close a position when the SBV crosses over the 20%
level and for a similar situation there could be an additional rule included:
Rule #6: If you see the SBV below
minus 20% or above plus 20% for more then 8-10 session in a row then lower the
signal line from minus 20 to minus 40-60% or raise from plus 20% to plus 40-60%
respectively
Table 1: Trades based on the 5-rule
(additional stop-loss rule) system.
|
Open Trades |
Closed Trades |
Profit
(points) |
|
Time |
Motivation |
Trade |
Index |
Time |
Motivation |
Trade |
Index |
|
12/11/07 |
rule
#4 |
Sell Short |
1487 |
12/20/07 |
rule #2 |
Buy to Cover |
1453 |
+34 |
|
12/20/07 |
rule
#2 |
Buy |
1453 |
12/27/07 |
rule #4 |
Sell |
1483 |
+30 |
|
12/27/07 |
rule #4 |
Sell Short |
1483 |
01/10/08 |
rule #2 |
Buy to Cover |
1400 |
+83 |
|
01/10/08 |
rule #2 |
Buy |
1400 |
01/11/08 |
rule #5 |
Sell |
1406 |
+6 |
|
01/15/08 |
rule #4 |
Sell Short |
1391 |
01/24/08 |
rule #6 |
Buy to Cover |
1341 |
+50 |
|
01/24/08 |
rule #6 |
Buy |
1341 |
01/25/08 |
rule #4 |
Sell |
1332 |
-9 |
|
01/25/08 |
rule #4 |
Sell Short |
1332 |
01/28/08 |
rule #3 |
Buy to Cover |
1340 |
-8 |
|
01/28/08 |
rule #3 |
Buy |
1340 |
01/29/08 |
rule #4 |
Sell |
1362 |
+22 |
|
01/29/08 |
rule #4 |
Sell Short |
1362 |
01/30/08 |
rule #3 |
Buy to Cover |
1359 |
+2 |
|
01/30/08 |
rule #3 |
Buy |
1359 |
02/05/08 |
rule #4 |
Sell |
1347 |
-12 |
|
02/05/08 |
rule #4 |
Sell Short |
1347 |
02/08/08 |
|
|
1331 |
+16 |
|
Total: |
+214 |
Note: The 20% level for the SBV indicator was
determined in relation to the prevailing market conditions at the time the
trading examples were selected. In order to establish the optimal critical
levels for the SBV indicator, traders should consider the current market
situation and review a chart history of prior volume surges including their
magnitude (i.e., the level the SBV indicator reached).
Our charts are unique in that they give traders the option to choose
specific chart settings that best fit their personal trading styles and risk
tolerance. Traders can thus develop and test their own trading systems. On our
charts, you can scroll back in history to test any system you created.
| 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
predictions. |
More Examples:
|
Date |
Index |
Timeframe |
Number of Trades |
|
April 25, 2008 |
S&P 500 |
15-day |
7 "Long" and 9 "Short" trades |
|
April 25, 2008 |
S&P 500 |
60-day |
7 "Long" and 8 "Short" trades |
|
April 18, 2008 |
S&P 500 |
15-day |
3 "Long" and 3 "Short" trades |
|
April 11, 2008 |
S&P 500 |
15-day |
4 "Long" and 5 "Short" trades |
|
April 4, 2008 |
NASDAQ 100 |
5-day |
7 "Long" and
6 "Short" trades |
|
March 28, 2008 |
S&P 500 |
60-day |
6 "Long" and
7 "Short" trades |
|
March 20, 2008 |
S&P 500 |
5-day |
3 "Long" and
4 "Short" trades |
|
March 14, 2008 |
S&P 500 |
5-day |
6 "Long" and 5 "Short" trades |
|
March 7, 2008 |
S&P 500 |
60-day |
9 "Long" and 9 "Short" trades |
|
February 29, 2008 |
S&P 500 |
60-day |
8 "Long" and 8 "Short" trades |
|
February 22, 2008 |
S&P 500 |
15-day |
4 "Long" and 5 "Short" trades |
|
February 15, 2008 |
S&P 500 |
60-day |
7 "Long" and 7 "Short" trades |
|
February 8, 2008 |
S&P 500 |
60-day |
6 "Long" and 6 "Short" trades |
|
February 1, 2008 |
S&P 500 |
60-day |
5 "Long" and 5 "Short" trades |
|
January 25, 2008 |
S&P 500 |
60-day |
5 "Long" and 5 "Short" trades |
|
January 18, 2008 |
S&P 500 |
60-day |
4 "Long" and 5 "Short" trades |
|
January 11, 2008 |
S&P 500 |
60-day |
5 "Long" and 5 "Short" trades |
|
January 4, 2008 |
S&P 500 |
60-day |
4 "Long" and 5 "Short" trades |
|
