S&P 500:
An Example of a Trading
System using the technical analysis based on the SBV Oscillator
June 13, 2008
+8% (108 points) in 2 months
This week SBV chart example is a
continuation of previous
example on
May 30, 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) |
 |
In the previous 60-day SBV chart example we
have explained the using of the trailing stop rule based on the SBV indicator:
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.
This week SBV example shows the using of this
rule on June 2, 2008.
We always stated that the trading system we
describe in our examples is very simple and there is always a room to improve
it. If you follow our examples you may see that even such simple and
straightforward system delivers profit. By going through the history of our
examples you may find description of different rules that could be embedded into
the system in order to make it more conservative, or to make it to generate more
signals, or to make it to react faster on strong signals, etc.
In this week example we would like to introduce
another rule that could be used in our system. We have already mentioned the
using of the "trailing stop" - the same principle could be used to generate
signals. In our examples the rules #2 and #4 are used to generate "Long" and
"Short" signals based on the fixed signal line (33% in our current example).
However, this rule could be modified into a rule which uses a trailing signal
line:
Rule #2 Example: Once SBV
indicator started to advance after have been below minus 30%, we will enter a
long position when SBV advances for 10% from its most recent lowest negative
level. If SBV declined below minus 20% and started to advance without crossing
minus 30% we will enter a long position when SBV advances above minus 20%.
Foe example, according to the rule above:
-
If SBV dropped to minus 75% and started to
advance we will enter a long position when SBV advances above minus 65%;
-
If SBV dropped to minus 40% and started to
advance we will enter a long position when SBV advances above minus 30%;
-
If SBV dropped to minus 25% and started to
advance we will enter a long position when SBV advances above minus 20%.
As you may see the rule
#2 above uses trailing principle to generate a "Long" signal. A similar rule
could be build instead of the rule #4 to generate a "Short" signal.
Note, all numbers (10%
trailing, 33% and 20% signals) in our examples are subjective and should be
tested before use.
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 33% (the
indicator will now show green), we enter a short position (if we are
not already short);
-
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);
-
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);
-
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);
-
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.
-
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.
|
Open Trades |
Closed Trades |
Profit
(points) |
|
Time |
Motivation |
Trade |
Index |
Time |
Motivation |
Trade |
Index |
|
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 |
05/27/08 |
rule #2 |
Buy to Cover |
1379 |
+31 |
|
05/27/08 |
rule #2 |
Buy |
1379 |
06/02/08 |
rule #6 |
Cash |
1388 |
+9 |
|
06/12/08 |
rule #2 |
Buy |
1350 |
06/13/08 |
|
|
1360 |
+10 |
|
Total: |
+108 |
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 |
|
June 27, 2008 |
S&P 500 |
15-day |
4 "Long" and 6 "Short" trades |
|
June 27, 2008 |
S&P 500 |
60-day |
7 "Long" and 6 "Short" trades |
|
June 20, 2008 |
S&P 500 |
60-day |
4 "Long" and 2 "Short" trades |
|
June 13, 2008 |
S&P 500 |
60-day |
4 "Long" and 2 "Short" trades |
|
June 6, 2008 |
S&P 500 |
15-day |
7 "Long" and 10 "Short" trades |
|
May 30, 2008 |
S&P 500 |
60-day |
4 "Long" and 3 "Short" trades |
|
May 23, 2008 |
S&P 500 |
60-day |
3 "Long" and 4 "Short" trades |
|
May 16, 2008 |
S&P 500 |
60-day |
4 "Long" and 3 "Short" trades |
|
May 9, 2008 |
NASDAQ 100 |
10-day |
10 "Long" and 10 "Short" trades |
|
May 2, 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 |
|
