+5% on the NASDAQ 100

The trading system below is very simple, yet, it should be adjusted to the personal trading style, selected trading vehicle and risk tolerance. For instance, a trader who wish to generate fewer trades may select higher timeframe or increase the SBV bar period. At the same time riskier trader (wiling to generate more trades) could select lower timeframe or reduce the SBV bar period. Use scrolling feature on our chart (arrow buttons at the left and right bottom of the chart) to scroll back in history and see the behavior of  any technical indicator in the past.

It's Simple and profitable

In our trading example, we applied the following simple system which is based on our SBV indicator:

1. 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);
2. 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);
3. 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);
4. 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);
5. 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.

The rules mentioned above could be applied for trading the S&P 500, Russell 2000, DOW Jones Industrial and other indexes.

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
04/25/08	rule #4	Sell Short	1916	04/25/08	rule #2	Buy to Cover	1909	+7
04/25/08	rule #2	Buy	1909	04/28/08	rule #4	Sell	1931	+22
04/28/08	rule #4	Sell Short	1931	04/29/08	rule #2	Buy to Cover	1923	+8
04/29/08	rule #2	Buy	1923	04/30/08	rule #4	Sell	1943	+20
04/30/08	rule #4	Sell Short	1943	04/30/08	rule #3	Buy to Cover	1945	-2
04/30/08	rule #3	Buy	1945	04/30/08	rule #4	Sell	1943	-2
04/30/08	rule #4	Sell Short	1943	05/01/08	rule #2	Buy to Cover	1941	+2
05/01/08	rule #2	Buy	1941	05/02/08	rule #4	Sell	1974	+33
05/02/08	rule #4	Sell Short	1974	05/02/08	rule #2	Buy to Cover	1980	-6
05/02/08	rule #2	Buy	1980	05/05/08	rule #4	Sell	1977	-3
05/05/08	rule #4	Sell Short	1977	05/05/08	rule #3	Buy to Cover	1973	+4
05/05/08	rule #3	Buy	1973	05/06/08	rule #1	Sell	1962	-11
05/06/08	rule #1	Sell Short	1962	05/06/08	rule #2	Buy to Cover	1968	-6
05/06/08	rule #2	Buy	1968	05/07/08	rule #4	Sell	1991	+23
05/07/08	rule #4	Sell Short	1991	05/07/08	rule #3	Buy to Cover	1994	-3
05/07/08	rule #3	Buy	1994	05/07/08	rule #4	Sell	1990	-4
05/07/08	rule #4	Sell Short	1990	05/08/08	rule #2	Buy to Cover	1969	+21
05/08/08	rule #2	Buy	1969	05/08/08	rule #4	Sell	1970	+1
05/08/08	rule #4	Sell Short	1970	05/08/08	rule #2	Buy to Cover	1967	+3
05/08/08	rule #2	Buy	1967	05/09/08	rule #5	Cash	1957	-10
Total:								+97

The system above is very simple and it is recommended that you incorporate additional rules that suit your personal risk tolerance. For instance, from the table above, you may see that if the system generates a negative trade in many cases the next trade is negative as well and more conservative trader may set a rule to ignore a signal which is generated after negatively closed trade. 

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.