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SBV Technical Analysis - Trading Volume with Confidence

Emini Chart Example



April 17, 2007

We used the following simple four-rule trading system based on our SBV indicator:

  1. Once the SBV indicator has advanced above plus 33% (the SBV indicator will show red), wait for it to decline below that level, then enter a short position;
  2. Once the SBV indicator has dropped below minus 33% (the SBV indicator will now show green), wait for it to rally above that level, then enter a long position;

    It is very important to use a stop-loss strategy – particularly for intraday trades. In our system, we applied the following rules to recognize when a false signal occurred (and thus to cut our losses short):
     

  3. If we are presently in a long position and prices start to decline, we will take a loss once the SBV indicator has dropped below minus 33%. This rule may also be used to open initiate a new short position;
     
  4. If we are currently in a short position and prices start to advance, we will take a loss once the SBV indicator has advanced above plus 33%. This rule may also be used to initiate a new long position.

    We have added the following rules to protect profits and cut losses:
  5. Exit positions by the end of the session;

    Additional rule we use for the first trade in session:
  6. Since the price trend could be under the influence of the night futures trading after the market opens, we do not open a first trade for the session by #3 and #4 rules;

Chart 1: Trading with the SBV indicator using a four-rule system.
S&P 500 E-mini. 1-day view. VMA1 = 30-minutes.

TimeTrade
Motivations
IndexDecisionTimeTrade MotivationsDecisionIndexProfit
(points)
09:50Rule #21475.00Buy10:45Rule #11778.00Sell Short+3.00
10:45Rule #11778.00Sell Short11:07Rule #41480.50Buy-2.50
11:07Rule #41480.50Buy11:18Rule #11480.50Sell Short0
11:18Rule #11480.50Sell Short13:04Rule #21478.50Buy+2.00
13:04Rule #21478.50Buy15:08Rule #11482.00Sell Short+2.50
15:08Rule #11482.00Sell Short16:13Rule #21481.50Buy+1.00

Total:   

+4.75

Important: A 33% trigger level for the SBV indicator was determined in relation to the prevailing market conditions at the time the examples above were selected. In order to establish the optimal critical levels for the SBV indicator, profit targets and stop-loss levels, traders should consider their personal trading style and risk tolerance. They should also review the current market situation and review a chart history of prior volume surges, including their magnitude (i.e., the level the SBV indicator reached).

Disclaimer: The chart example is intended for educational purposes only - it does not constitute trading advice, nor does it make or imply any market trend predictions.

More Examples:

DateTitle
April 23, 2007 SBV Indicator Example for the Russell 2000 E-mini.
April 17, 2007 SBV Indicator Example for the S&P 500 E-mini.
February 02, 2007 SBV Indicator Example for the S&P 500 E-mini.
January 23, 2007 SBV Indicator Example for the Russell 2000 E-mini.
December 19, 2006 SBV Indicator Example for the S&P 500 E-mini on december 19 of 2006 - simple trading system
December 11, 2006 SBV Example for the S&P 500 E-mini on december 11of 2006 - using selling and buying volume to trade emini
November 29, 2006 Russell 2000 E-mini SBV trading.
August 11, 2006 SBV Indicator Example for the S&P 500 E-mini.
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