S&P 500:

An Example of a Trading System based on the SBV Oscillator

February 20, 2009

Chart 1. Relationship between the SBV oscillator and index reversal points. S&P 500 index. 60-day view. 1 bar = 1 hour. SBV(16)

1. Once the SBV indicator declines below negative signal level (the indicator will now show red), we enter a short position (if we are not already short);
2. Once the SBV indicator advances above negative signal level (after having been below that level), we will enter a long position (the indicator still shows red);
3. Once the SBV indicator rallies above positive signal level (the indicator will now show green), we enter a long position (if we are not already long);
4. Once the SBV indicator declines below positive signal level (after having been above that level), we will enter a short position (the indicator still shows green);
5. 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.

Table 1: Trades based on the 60-day SBV(16) 5-rule (additional stop-loss rule) system.

Time	Motivation	Signal	Index	Profit (points)
12/16/08	rule #2	Buy	884	+20
12/18/08	rule #4	Sell Short	904	+36
12/26/08	rule #2	Buy	868	+48
01/07/09	rule #4	Sell Short	916	+92
01/23/09	rule #2	Buy	824	+21
01/29/09	rule #4	Sell Short	845	+19
02/03/09	rule #2	Buy	826	+11
02/05/09	rule #4	Sell Short	837	-7
02/05/09	rule #3	Buy	844	-12
02/10/09	rule #4	Sell Short	832	+8
02/12/09	rule #2	Buy	824	+3
02/17/09	rule #5	Cash	827
Total:				+239 (+27%)

Example of using 60-day SBV(20)

Table 1: Trades based on the 60-day SBV(20) 5-rule (additional stop-loss rule) system.

Time	Motivation	Signal	Index	Profit (points)
12/16/08	rule #2	Buy	884	+20
12/18/08	rule #4	Sell Short	904	+36
12/26/08	rule #2	Buy	868	+48
01/07/09	rule #4	Sell Short	916	+92
01/23/09	rule #2	Buy	824	+15
01/26/09	rule #4	Sell Short	839	-10
01/26/09	rule #2	Buy	848	-12
01/30/09	rule #4	Sell Short	836	-5
02/03/09	rule #3	Buy	841	-8
02/04/09	rule #4	Sell Short	833	-11
02/05/08	rule #2	Buy	844	-15
02/10/09	rule #4	Sell Short	829	-7
02/13/08	rule #2	Buy	836	-40
02/17/08	rule #5	Cash	796
Total:				+103 (+12%)

If you compare 60-day SBV(20) with 60-day SBV(16) you will see that the performance of the SBV(20) has become strongly negative starting from January 26, 2009. Already by February 3, 2009 you may see tendency of the system based on the SBV(20) to generate signals when it's too late (trend is already reversed). In our "Analysis FAQ" you may find the answer what to do in similar situations:

"b) Stop trading and put your system on test to see if the signals are generated when it's too late constantly or this is just a single exception;

c) If the market became more volatile and or the signals are generated when it is too late (usually during the higher time-frame down-trend) you may try to adjust your trading system in the way it starts to generate signals faster (more frequent): you may try to chose lower timeframe chart, reduce period setting for indicators or change the trigger point (rules when the signal is generated)"

Based on the fact that the trading system based on the SBV(20) started to generate late signals we used 60-day SBV(16) chart in our example.

Summary: If you see 60-day SBV(20) chart started to generate late signals you may lower the SBV setting and try to use 60-day SBV(16) chart or you may try lowering timeframe and using 30-day SBV(20)

Note: The 16% and 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.

 More Examples:

Date	Index	Timeframe	Result	Number of Trades
Nov 20, 2009	S&P 500	60-day	+66 points (+6.6%)	12 "Long" and 11 "Short"
Nov 13, 2009	S&P 500	60-day	+59 points (+5.9%)	11 "Long" and 9 "Short"
Nov 6, 2009	Nasdaq 100	10-day	+81 points (+4.7%)	9 "Long" and 9 "Short"
Oct 30, 2009	Nasdaq 100	10-day	+31 points (+2.3%)	8 "Long" and 7 "Short"
Oct 23, 2009	Nasdaq 100	10-day	+40 points (+2.3%)	8 "Long" and 10 "Short"
Oct 16, 2009	Russell 2000	5-day	+10 points (+1.7%)	8 "Long" and 10 "Short"
Oct 9, 2009	S&P 500	60-day	+59 points (+5.0%)	4 "Long" and 4 "Short"
Oct 2, 2009	S&P 500	15-day	+41 points (+3.8%)	5 "Long" and 6 "Short"
Sept 18, 2009	S&P 500	60-day	+107 points (+12%)	5 "Long" and 4 "Short"
Sept 18, 2009	S&P 500	60-day	+107 points (+12%)	5 "Long" and 4 "Short"
Sept 11, 2009	S&P 500	60-day	+81 points (+9.2%)	5 "Long" and 4 "Short"
Sept 4, 2009	S&P 500	60-day	+44 points (+5.0%)	5 "Long" and 4 "Short"
Aug 28, 2009	S&P 500	5-day	+14 points (+1.4%)	9 "Long" and 6 "Short"
Aug 21, 2009	S&P 500	5-day	+14 points (+1.4%)	7 "Long" and 9 "Short"
Aug 14, 2009	S&P 500	15-day	+15 points (+1.5%)	8 "Long" and 7 "Short"
Aug 7, 2009	S&P 500	60-day	+93 points (+9.8%)	6 "Long" and 6 "Short"
July 31, 2009	S&P 500	60-day	+104 points (+11%)	4 "Long" and 4 "Short"
July 24, 2009	S&P 500	60-day	+109 points (+12%)	4 "Long" and 4 "Short"
July 17, 2009	S&P 500	15-day	+74 points (+7.9%)	7 "Long" and 8 "Short"
July 10, 2009	S&P 500	15-day	+57 points (+6.3%)	8 "Long" and 8 "Short"
July 02, 2009	Nasdaq 100	30-day	+74 points (+5.0%)	7 "Long" and 7 "Short"
June 26, 2009	S&P 500	30-day	+68 points (+7.5%)	8 "Long" and 8 "Short"
June 19, 2009	S&P 500	30-day	+48 points (+5.3%)	7 "Long" and 7 "Short"
June 12, 2009	S&P 500	15-day	+47 points (+5.0%)	9 "Long" and 10 "Short"
June 5, 2009	S&P 500	30-day	+59 points (+6.4%)	5 "Long" and 7 "Short"
May 29, 2009	S&P 500	30-day	+36 points (+4.2%)	8 "Long" and 9 "Short"
May 22, 2009	S&P 500	30-day	+32 points (+3.7%)	6 "Long" and 9 "Short"
May 15, 2009	S&P 500	10-day	+39 points (+4.3%)	7 "Long" and 7 "Short"
May 8, 2009	S&P 500	60-day	+84 points (+11.8%)	8 "Long" and 8 "Short"
May 1, 2009	S&P 500	60-day	+65 points (+9.1%)	7 "Long" and 7 "Short"
April 24, 2009	Nasdaq 100	5-day	+53 points (+4.0%)	6 "Long" and 7 "Short"
April 17, 2009	S&P 500	60-day	+93 points (+11%)	7 "Long" and 6 "Short"
April 9, 2009	S&P 500	60-day	+99 points (+12%)	6 "Long" and 5 "Short"
April 3, 2009	S&P 500	15-day 60-day	+135 points (+17%) +86 points (+10%)	6 "Long" and 6 "Short" 5 "Long" and 4 "Short"
March 27, 2009	S&P 500	15-day	+129 points (+18%)	7 "Long" and 8 "Short"
March 20, 2009	S&P 500	15-day	+45 points (+6.3%)	9 "Long" and 10 "Short"
March 13, 2009	S&P 500	15-day	+38 points (+5.0%)	10 "Long" and 10 "Short"
March 6, 2009	S&P 500	15-day	+83 points (+11%)	10 "Long" and 10 "Short"
Feb. 27, 2009	S&P 500	15-day	+46 points (+5.6%)	10 "Long" and 10 "Short"
Feb. 20, 2009	S&P 500	60-day	+239 points (+27%)	6 "Long" and 5 "Short"
Feb. 13, 2009	S&P 500	60-day	+239 points (+27%)	6 "Long" and 5 "Short"
Feb. 2, 2009	S&P 500	15-day	+58 points (+7.0%)	7 "Long" and 6 "Short"
Jan. 23, 2009	Nasdaq 100	5-day	+75 points (+6.2%)	7 "Long" and 7 "Short"
Jan. 23, 2009	S&P 500	60-day	+287 points (+34%)	9 "Long" and 7 "Short"
Jan. 16, 2009	S&P 500	60-day	+254 points (+30%)	8 "Long" and 7 "Short"
Jan. 09, 2009	S&P 500	60-day	+252 points (+29%)	9 "Long" and 9 "Short"
Jan. 02, 2009	S&P 500	60-day	+242 points (+24%)	9 "Long" and 8 "Short"

 

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11/21/2009 - SV1