PHLX Semiconductor Index
PHLX Semiconductor Trading Systems
A trading system encompasses certain rules which help determine the entry and exit points for semiconductor index. In order to determine the trend, the strength, the direction and the use of the market for further investments, different technical analysis indicators are used in a trading system. In order to fit specific needs of each individual trader, various trading systems may be created based on the technical indicator.
Semiconductor Index Trading System Rules
In order to create a complete trading system to trade semiconductor index, certain rules must be followed: the signals need to be generated, a procedure for making decisions must be set up, and risk management must be incorporated. Trading software which allows one to auto-trade the signals by the system, is included in the complete trading system. An index trading system should be objective and mechanical. In order to create a trading system, the main rule is to avoid the emotional factor. In order to test the system and to adjust it, technical analysis incorporates a set of objective trading rules (usually in a formula(s) or algorithm(s) format).
Rules for an Semiconductor Index Trading System
Using a volume-based system to trade the Semiconductor Index as an example, the following simple rules could apply:
- Establish the critical VMA (volume moving average) levels that precede index reversals in a majority of cases;
- During a decline on the index, buy when the VMA exceeds the critical level (as defined in step 1) and then VMA starts to move lower.
- During an advance on the index, go short when the VMA exceeds the critical level (as defined in step 1) and VMA then starts to move lower.
These rules are very basic; depending on the specific trading application, they may have to be adjusted.