S&P 500:
An Example of a Trading
System based on the SBV Oscillator
September 19, 2008
SBV
signaled the bottom of the crash
In our Market outlook on September 17, 2008 we have mentioned:
"The same as we
mentioned on January 23rd of 2008 we will repeat for those who uses 60-day
SBV(20) simple trading system: it is recommended to reduce the negative level
from minus 20% to minus 60-70% after such strong Selling volume accumulation -
there is no need to wait until the SBV runs to the minus 30-20% level to see
confirmation of the recovery."
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 it
is logical to expect a sharper and a stronger reversal than usual. In this case
it could be too late to close a position when the SBV crosses over the 20%
level .
This helped to spot exact bottom of the crash
in January and
March 2008
as well as few days ago.
+10% in last week on crash and
recovery
|
Chart 1. Relationship between the SBV oscillator and
index reversal points. S&P 500 index. 60-day view. 1 bar = 1 hour. SBV(20) |
 |
Signal Level 1: If the SBV runs above plus 20% or drops below
minus 20% and reverses its trend without hitting 33% then use 20% as signal
line;
Signal Level 2: If the SBV runs above plus 33% or drops below
minus 33%, then use 33% as signal line.
-
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);
-
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);
-
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);
-
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);
-
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 5-rule
(additional stop-loss rule) system.
|
Open Trades |
Closed Trades |
Profit
(points) |
|
Time |
Motivation |
Trade |
Index |
Time |
Motivation |
Trade |
Index |
|
07/24/08 |
rule #4 |
Sell Short |
1269 |
07/29/08 |
rule #2 |
Buy to Cover |
1253 |
+16 |
|
07/29/08 |
rule #2 |
Buy |
1253 |
08/01/08 |
rule #4 |
Sell |
1261 |
+8 |
|
08/01/08 |
rule #4 |
Sell Short |
1261 |
08/05/08 |
rule #2 |
Buy to Cover |
1270 |
-9 |
|
08/05/08 |
rule #2 |
Buy |
1270 |
08/07/08 |
rule #4 |
Sell |
1270 |
0 |
|
08/07/08 |
rule #4 |
Sell Short |
1270 |
08/15/08 |
rule #5 |
Cash |
1294 |
-24 |
|
08/18/08 |
rule #4 |
Sell Short |
1280 |
08/21/08 |
rule #2 |
Buy to Cover |
1273 |
+7 |
|
08/21/08 |
rule #2 |
Buy |
1273 |
08/25/08 |
rule #4 |
Sell |
1284 |
+11 |
|
08/25/08 |
rule #4 |
Sell Short |
1284 |
08/28/08 |
rule #5 |
Cash |
1288 |
-4 |
|
08/29/08 |
rule #4 |
Sell Short |
1291 |
09/08/08 |
rule #4 |
Buy to Cover |
1255 |
+36 |
|
09/08/08 |
rule #2 |
Buy |
1255 |
09/11/08 |
rule #5 |
Cash |
1224 |
-31 |
|
09/12/08 |
rule #2 |
Buy |
1243 |
09/15/08 |
rule #4 |
Sell |
1226 |
-17 |
|
09/15/08 |
rule #4 |
Sell Short |
1226 |
09/18/08 |
rule #2 |
Buy to Cover |
1180 |
+46 |
|
09/18/08 |
rule #2 |
Buy |
1180 |
09/19/08 |
|
|
1255 |
+75 |
|
Total: |
+114 |
Note:
The 33% 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.
| Disclaimer: The chart
example is intended for educational purposes only and it does not
constitute trading advice, nor does it make or imply any market trend
predictions. |
More Examples:
|
Date |
Index |
Timeframe |
Result |
Number of Trades |
|
Jan. 02, 2009 |
S&P 500 |
60-day |
+242 points (+24%) |
9 "Long"
and 8 "Short" |
|
Dec. 19, 2008 |
S&P 500 |
60-day |
+294 points (+31%) |
13 "Long"
and 12 "Short" |
|
Dec. 19, 2008 |
S&P 500 |
60-day |
+290 points (+30%) |
12 "Long"
and 12 "Short" |
|
Dec. 12, 2008 |
S&P 500 |
10-day |
+91 points (+11%) |
9 "Long"
and 8 "Short" |
|
Dec. 5, 2008 |
S&P 500 |
60-day |
+354 points (+36%) |
10 "Long"
and 10 "Short" |
|
Nov. 28, 2008 |
S&P 500 |
60-day |
+420 points (+43%) |
10 "Long"
and 9 "Short" |
|
Nov. 21, 2008 |
S&P 500 |
60-day |
+244 points (+20%) |
14 "Long"
and 10 "Short" |
|
Nov. 14, 2008 |
Nasdaq 100 |
10-day |
+69 points (+5.1%) |
5 "Long"
and 6 "Short" |
|
Nov. 7, 2008 |
DJI |
30-day |
+3,137 points (+30%) |
5 "Long"
and 6 "Short" |
|
Oct. 31, 2008 |
S&P 500 |
5-day |
+42 points (+4.7%) |
9 "Long"
and 9 "Short" |
|
Oct. 24, 2008 |
DJI |
30-day |
+3,004 points (+27%) |
5 "Long"
and 6 "Short" |
|
Oct. 17, 2008 |
DJI |
30-day |
+2,886 points (+26%) |
4 "Long"
and 4 "Short" |
|
Oct. 10, 2008 |
DJI |
30-day |
+2,262 points (+20%) |
5 "Long"
and 6 "Short" |
|
Oct. 3, 2008 |
DJI |
30-day |
+958 points (+8.3%) |
8 "Long"
and 9 "Short" |
|
Sept. 26, 2008 |
S&P 500 |
60-day |
+74 points (+5.8%) |
7 "Long"
and 7 "Short" |
|
Sept. 19, 2008 |
S&P 500 |
60-day |
+114 points (+9.0%) |
6 "Long"
and 7 "Short" |
|
Sept. 12, 2008 |
DJI |
30-day |
+1,232
points (+11%) |
5 "Long" and 5 "Short" |
|
Sept. 5, 2008 |
DJI |
30-day |
+734 points (+6.3%) |
5 "Long"
and 5 "Short" |
|
Aug. 29, 2008 |
DJI |
30-day |
+600 points (+5.2%) |
6 "Long"
and 6 "Short" |
|
Aug. 22, 2008 |
DJI |
30-day |
+995 points (+8.7%) |
5 "Long"
and 5 "Short" |
|
Aug. 15, 2008 |
S&P 500 |
15-day |
+41 points (+3.2%) |
7 "Long"
and 8 "Short" |
|
Aug. 8, 2008 |
S&P 500 |
15-day |
+44 points (+3.5%) |
6 "Long"
and 7 "Short" |
|
Aug. 1, 2008 |
S&P 500 |
15-day |
+45 points (+3.6%) |
4 "Long"
and 8 "Short" |
|
July 25, 2008 |
S&P 500 |
15-day |
+28 points (+2.2%) |
1 "Long"
and 3 "Short" |
|
July 18, 2008 |
S&P 500 |
60-day |
+7 points (+0.0%) |
9 "Long"
and 5 "Short" |
|
July 11, 2008 |
S&P 500 |
15-day |
+103 points (+7.8%) |
4 "Long"
and 6 "Short" |
|
July 3, 2008 |
S&P 500 |
15-day |
+69 points (+5.2%) |
4 "Long"
and 6 "Short" |
|
June 27, 2008 |
S&P 500 |
60-day |
+62 points (+4.4%) |
7 "Long"
and 6 "Short" |
|
June 20, 2008 |
S&P 500 |
60-day |
+113 points (+8.5%) |
4 "Long"
and 2 "Short" |
|
June 13, 2008 |
S&P 500 |
60-day |
+108 points (+8.1%) |
4 "Long"
and 2 "Short" |
|
June 6, 2008 |
S&P 500 |
15-day |
+47 points (+3.4%) |
7 "Long"
and 10 "Short" |
|
May 30, 2008 |
S&P 500 |
60-day |
+201 points (+15%) |
4 "Long"
and 3 "Short" |
|
May 23, 2008 |
S&P 500 |
60-day |
+222 points (+16%) |
3 "Long"
and 4 "Short" |
|
May 16, 2008 |
S&P 500 |
60-day |
+243 points (+18%) |
4 "Long"
and 3 "Short" |
|
May 9, 2008 |
NASDAQ 100 |
10-day |
+97 points (+5.1%) |
10
"Long" and 10 "Short" |
|
May 2, 2008 |
S&P 500 |
15-day |
+31 points (+2.2%) |
7 "Long"
and 9 "Short" |
|
April 25, 2008 |
S&P 500 |
60-day |
+251 points (+18%) |
7 "Long"
and 8 "Short" |
|
April 18, 2008 |
S&P 500 |
15-day |
+91 points (+6.6%) |
3 "Long"
and 3 "Short" |
|
April 11, 2008 |
S&P 500 |
15-day |
+39 points (+3.0%) |
4 "Long"
and 5 "Short" |
|
April 4, 2008 |
NASDAQ 100 |
5-day |
+93
points (+5.2%) |
7 "Long" and 6 "Short" |
|
March 28, 2008 |
S&P 500 |
60-day |
+29
points (+2.1%) |
6 "Long" and 7 "Short" |
|
March 20, 2008 |
S&P 500 |
5-day |
+53
points (+4.2%) |
3 "Long" and 4 "Short" |
|
March 14, 2008 |
S&P 500 |
5-day |
+77
points (+6.0%) |
6 "Long" and 5 "Short" |
|
March 7, 2008 |
S&P 500 |
60-day |
+222 points (+15%) |
9 "Long"
and 9 "Short" |
|
Febr. 29, 2008 |
S&P 500 |
60-day |
+211 points (+14%) |
8 "Long"
and 8 "Short" |
|
Feb. 22, 2008 |
S&P 500 |
15-day |
+85 points (+6.4%) |
4 "Long"
and 5 "Short" |
|
Feb. 15, 2008 |
S&P 500 |
60-day |
+211 points (+15%) |
7 "Long"
and 7 "Short" |
|
Feb. 8, 2008 |
S&P 500 |
60-day |
+214 points (+14%) |
6 "Long"
and 6 "Short" |
|
Feb. 1, 2008 |
S&P 500 |
60-day |
+246 points (+17%) |
5 "Long"
and 5 "Short" |
|
Jan. 25, 2008 |
S&P 500 |
60-day |
+330 points (+20%) |
5 "Long"
and 5 "Short" |
|
Jan. 18, 2008 |
S&P 500 |
60-day |
+330 points (+22%) |
4 "Long" and 5 "Short" |
|
Jan. 11, 2008 |
S&P 500 |
60-day |
+309 points (+21%) |
5 "Long" and 5 "Short" |
|
Jan. 4, 2008 |
S&P 500 |
60-day |
+291 points (+20%) |
4 "Long" and 5 "Short" |
|
