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Below, we list four simple trading rules based on our SBV indicator. The 33% level for the SBV indicator is used for illustrative purposes only in order to show how the system works:

(A) To initiate a long position:

1. Once the SBV indicator has dropped below minus 33% (the SBV indicator will show red), wait for it to advance above that level and then enter a long position;
2. Once the SBV indicator has advanced above plus 33% (the indicator will now show green), enter a long position (if are not already long).
   
   (B) To close a long position:
3. Take profits once the price / index has advanced to your pre-determined profit target level OR when the SBV indicator advances above plus 33% (the SBV indicator will show green) and then drops below that level, whichever occurs first;
4. Take a loss if the price / index declines below your pre-defined stop loss OR when the SBV indicator drops below minus 33% (the SBV indicator will show red), whichever occurs first.

Chart 1:	Example of a long trade using rules #1 and #3, and a critical level of 33% for the SBV indicator. S&P 500 index. 15-day view. SBV(16,1)

The critical levels you select for the SBV indicator may have to be adjusted, depending on your personal trading style and risk tolerance. You may select these critical levels based on the timeframe you wish to analyze, as well as the number of trades you wish to generate within that timeframe. In the examples below, we used a critical level of 33% for the SBV indicator. Scrolling backward on our charts (into historical data), you may notice that lower critical levels generate more trades.

In the following example, we illustrate how Rule #4 was used to cut losses in a long trade that was initiated with Rule #1. Rule #4 can serve not just to cut losses when an index moves against your long position - but use to open a short position at the same time.

Chart 2:	Example of a long trade using rules #1 and #4, and a critical level of 33% for the SBV indicator. S&P 500 index. 15-day view. SBV(16,1)

In the following example, we again selected 33% as the critical level for the SBV indicator. The example illustrates how Rule #2 was used to trigger a long trade.

Chart 3:	Example of a long trade using rules #2 and #3, and a critical level of 33% for the SBV indicator. S&P 500 index. 15-day view. SBV(16,1).

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