The chart above shows 2 signal lines: 33% (red line) and 20% (green line). This example clearly illustrate what was mentioned our last week's example: "Higher signal line generates fewer trades" and "Higher signal line generates signal earlier". The 33% line did not generate any signals for the last week and the signal that was generated on May 14, 2008 is now in profit in spite the fact that it was generated somewhat early (a few days before reversal). The blue 20% signal line would generate a signal to sell after the reversal, yet this signal line setting would generate another two signals (sell short and buy) on May 15, 2008.

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 33% (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 33% (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 33% (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 33% (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.

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
03/24/08	rule #4	Sell Short	1358	03/31/08	rule #2	Buy to Cover	1321	+37
03/31/08	rule #2	Buy	1321	04/04/08	rule #4	Sell	1374	+53
04/04/08	rule #4	Sell Short	1374	04/15/08	rule #2	Buy to Cover	1334	+40
04/15/08	rule #2	Buy	1334	04/21/08	rule #4	Sell	1384	+50
04/21/08	rule #4	Sell Short	1384	04/24/08	rule #5	Cash	1389	-5
05/12/08	rule #2	Buy	1397	05/14/08	rule #4	Sell	1410	+13
05/14/08	rule #4	Sell Short	1410	05/23/08			1376	+34
Total:								+222

Note: The 33% 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.