S&P 400 Trading System

Introduced in 1991, S&P 400 is now the most widely used index for mid-sized companies. Today, mid caps are being recognized as an independent asset class, with risk/reward profiles that differ considerably from both large-caps and small-caps. S&P 400 is a core component of the U.S. indices that could be used as building blocks for portfolio construction.

The S&P 400 is not as popular as some of the larger indices (such as the S&P 500).

A technical analysis indicator is used to determine the trend of a market, the strength of the market and the direction of the market. A technical analysis indicator may be specific or non-specific. Some technical analysis indicators can be quantified in the form of an equation or algorithm. Others show up as patterns (e.g. head and shoulders, trendlines, support and resistance).

S&P Mid Cap 400 Index Technical Analysis Rules
A trading system is created by generating signals, setting up a decision making procedure, and incorporating risk management into the system. A trading system is supposed to be objective and mechanical. The analyst combines a set of objective trading rules (usually in a formula(s) or algorithm(s)).

As a general rule, good technical analysis indicators are the building blocks of good trading systems. However, as previously mentioned, even good technical analysis indicators can lose their validity when combined in a trading system. Therefore, it is important to not only back-test your system but to also forward-test your system in real time.

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