| S&P 500: An Example of a Trading System using the SBV Oscillator March 7, 2008 Another Move DOWN - This week SBV chart example is a continuation of previous example on February 29, 2008. In this week's example we use the same settings that were already used by showing the consistency of our trading system over the long period of time. This week SBV chart example is based on the 60-day SBV(20) S&P 500 chart.
It's Simple and profitable In our trading example, we applied the following simple system which is based on our SBV indicator:
In our Market outlook on January 23,2008 we have mentioned: "A note for those who use 60-day SBV(20) simple trading system: it is recommended to reduce the negative level from minus 20% to minus 50-60% after such a prolonged Selling volume accumulation. An additional rule that may increase an efficiency of the system should now include - 'If you see the SBV below minus 20% for more then 8-10 session in a row, then lower the signal line from minus 20 to minus 50-60%" This is one of the ways to improve the system. When the market is heading in one direction for a prolonged period of time and we start to see the Selling or Buying volume accumulation growing to big sizes (big red or green SBV areas) it is logical to expect a sharper and a stronger reversal than usual. In this case it could be a little late to close a position when the SBV crosses over the 20% level and for a similar situation there could be an additional rule included: Rule #6: If you see the SBV below minus 20% or above plus 20% for more then 8-10 session in a row then lower the signal line from minus 20 to minus 40-60% or raise from plus 20% to plus 40-60% respectively Table 1: Trades based on the 5-rule (additional stop-loss rule) system.
Note: The 20% 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.
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