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SBV
Indicators |
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S&P 500:
An Example of a Trading
System using the technical analysis based on the SBV Oscillator
May 30, 2008
+15% in 2 months
This week SBV chart example is a
continuation of previous
example on
May 23, 2008. In this week's example we use
33% signal line.
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Chart 1. Relationship between the SBV oscillator and
index reversal points. S&P 500 index. 60-day view. 1 bar = 1 hour. SBV(20) |
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This week's example has interesting
situation when SBV did not reach 33% trigger level, yet, started to decline.
From one side, the system did not generated a signal to close the
position that was opened on May 27, 2008. From the other side, the SBV started
to decline by increasing the odds of possible move down and if the market drops
the waiting when the rule #5 (see the system below) is triggered may lead the currently winning
position into a lost trade.
Please, keep in mind that we always stated
that this system is simple, yet, it's recommended to adjust this system to the
personal trading style and risk tolerance by embedding into the system
additional rules. Yes, we show only 4-5 rules (even with such small number of
rules the system generates positive returns), however it does not imply that
there is no room for the system improvement.
In the current situation the system is in
the +1.4% profitable long position with possibility of the turn down without
hitting the 33% signal line. It would be logical in such situation to protect
the profit by embedding into the system an additional rule. Many traders
use trailing stop to protect a profit and this strategy could be used in our
system as well. In the current example a system user may say:
Trailing Stop Rule Example #1:
If the SBV advanced above 20% and started to decline
without crossing 33%
we close the
long position and open short position if the SBV declines below 20%
or
Trailing Stop Rule Example #2:
Once SBV declined for more then 10% and we are in long, we close a long
position and
and stay in cash
until a new signal is generated.
The rule example #1 is
more specific and the rule example #2 is more general. Yet, the second one could
be used instead of or as addition to the rule #5 (stop-loss rule) in the system
we describe below.
It's
Simple and profitable
In our trading example, we applied the following
simple system which is based on our SBV indicator:
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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);
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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);
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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);
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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);
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Additional Stop Loss Rule -
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.
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Additional Trailing Stop Rule - If we are in long position
and
SBV declined for more then 10%, we close a long
position and and stay in cash
until a new signal is generated.
If we are in short position and
SBV advanced for more then 10%, we close a short
position and and stay in cash
until a new signal is generated.
Table 1: Trades based on the 5-rule
(additional stop-loss rule) system.
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Open Trades |
Closed Trades |
Profit
(points) |
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Time |
Motivation |
Trade |
Index |
Time |
Motivation |
Trade |
Index |
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03/31/08 |
rule #2 |
Buy |
1321 |
04/04/08 |
rule #4 |
Sell |
1374 |
+53 |
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04/04/08 |
rule #4 |
Sell Short |
1374 |
04/15/08 |
rule #2 |
Buy to Cover |
1334 |
+40 |
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04/15/08 |
rule #2 |
Buy |
1334 |
04/21/08 |
rule #4 |
Sell |
1384 |
+50 |
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04/21/08 |
rule #4 |
Sell Short |
1384 |
04/24/08 |
rule #5 |
Cash |
1389 |
-5 |
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05/12/08 |
rule #2 |
Buy |
1397 |
05/14/08 |
rule #4 |
Sell |
1410 |
+13 |
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05/14/08 |
rule #4 |
Sell Short |
1410 |
05/27/08 |
rule #2 |
Buy to Cover |
1379 |
+31 |
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05/27/08 |
rule #2 |
Buy |
1379 |
05/30/08 |
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1398 |
+19 |
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Total: |
+201 |
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.
| Disclaimer: The chart
example is intended for educational purposes only and it does not
constitute trading advice, nor does it make or imply any market trend
predictions. |
More Examples:
|
Date |
Index |
Timeframe |
Number of Trades |
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June 27, 2008 |
S&P 500 |
15-day |
4 "Long" and 6 "Short" trades |
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June 27, 2008 |
S&P 500 |
60-day |
7 "Long" and 6 "Short" trades |
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June 20, 2008 |
S&P 500 |
60-day |
4 "Long" and 2 "Short" trades |
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June 13, 2008 |
S&P 500 |
60-day |
4 "Long" and 2 "Short" trades |
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June 6, 2008 |
S&P 500 |
15-day |
7 "Long" and 10 "Short" trades |
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May 30, 2008 |
S&P 500 |
60-day |
4 "Long" and 3 "Short" trades |
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May 23, 2008 |
S&P 500 |
60-day |
3 "Long" and 4 "Short" trades |
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May 16, 2008 |
S&P 500 |
60-day |
4 "Long" and 3 "Short" trades |
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May 9, 2008 |
NASDAQ 100 |
10-day |
10 "Long" and 10 "Short" trades |
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May 2, 2008 |
S&P 500 |
15-day |
7 "Long" and 9 "Short" trades |
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April 25, 2008 |
S&P 500 |
60-day |
7 "Long" and 8 "Short" trades |
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April 18, 2008 |
S&P 500 |
15-day |
3 "Long" and 3 "Short" trades |
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April 11, 2008 |
S&P 500 |
15-day |
4 "Long" and 5 "Short" trades |
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April 4, 2008 |
NASDAQ 100 |
5-day |
7 "Long" and
6 "Short" trades |
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March 28, 2008 |
S&P 500 |
60-day |
6 "Long" and
7 "Short" trades |
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March 20, 2008 |
S&P 500 |
5-day |
3 "Long" and
4 "Short" trades |
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March 14, 2008 |
S&P 500 |
5-day |
6 "Long" and 5 "Short" trades |
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March 7, 2008 |
S&P 500 |
60-day |
9 "Long" and 9 "Short" trades |
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February 29, 2008 |
S&P 500 |
60-day |
8 "Long" and 8 "Short" trades |
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February 22, 2008 |
S&P 500 |
15-day |
4 "Long" and 5 "Short" trades |
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February 15, 2008 |
S&P 500 |
60-day |
7 "Long" and 7 "Short" trades |
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February 8, 2008 |
S&P 500 |
60-day |
6 "Long" and 6 "Short" trades |
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February 1, 2008 |
S&P 500 |
60-day |
5 "Long" and 5 "Short" trades |
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January 25, 2008 |
S&P 500 |
60-day |
5 "Long" and 5 "Short" trades |
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January 18, 2008 |
S&P 500 |
60-day |
4 "Long" and 5 "Short" trades |
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January 11, 2008 |
S&P 500 |
60-day |
5 "Long" and 5 "Short" trades |
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January 4, 2008 |
S&P 500 |
60-day |
4 "Long" and 5 "Short" trades |
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