1 point on the S&P 500 = $50 on 1 E-mini S&P 500 futures contract

40 points on the S&P 500 = $20,000 on 10 E-mini S&P 500 contracts

This week's SBV chart example is based on the 5-day SBV(20) S&P 500 chart. For 5-day and shorter timeframes, the majority of signals are generated during trading hours. In this case, some traders may prefer to hold their positions overnight while the other traders may chose to close all opened positions before the end of a trading session.

In this week's chart example, we show one of the ways by which the SBV simple trading system can be adjusted to avoid being in a trade overnight.

Example #1 (with overnight signals)

Chart 1. The simple trading system with overnight signals.
S&P 500 index. 5-day view. 1 bar = 5 minutes. SBV(20)

It's Simple and profitable

In our trading example, we applied the following simple system which is based on our SBV indicator:

1. Once the SBV indicator has fallen below a negative signal level (the indicator will now show red), we will enter a short position (if we are not already short);
2. Once the SBV indicator has advanced above a 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 has rallied above a positive signal level (the indicator will now show green), we will enter a long position (if we are not already long);
4. Once the SBV indicator has fallen below a 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 had dropped into negative territory and has begun to rise without having hit the signal line, close the short position when the SBV is back in positive territory, and stay in cash until a new signal appears.
   
   Do the opposite for a long position: if the SBV had moved into positive territory and has begun to decline without having hit the positive signal line, close the long position when the SBV is back in negative territory, and stay in cash until a new signal appears.

Detailed system description with explanation of used rules could be found in our "SBV Trading System" tutorial.

Example #2 (no overnight signals)

If a trader prefers to close all signals before the end of a trading session, the simple trading system used in Example #1 can be modified to provide rules that provide guidance in deciding what to do at the market open and what to do at the market close. Below we show a few rules that can be added to the simple trading system above that uses plus 20% and minus 20% as signal lines.

After the Market opens:

• If the SBV indicator is above plus 20% and moves up, we will open a long position;
• If the SBV indicator is below minus 20% and moves down, we will open a short position;
• In all other cases we will wait until a new signal is generated.

Before the Market closes:

• If a signal is generated when there is less than one hour remaining before the closing bell (after 15:00), this signal is used to close only a previously opened position. No new position is opened during the last hour of trading;
•  If no signals were generated during the last hour of trading, any (or use “the”) previously opened position is closed at the end of the trading session.

Chart 2. The simple trading system without overnight signals.
S&P 500 index. 5-day view. 1 bar = 5 minutes. SBV(20)

Note: The 20% level for the SBV indicator was determined in relation to the prevailing market conditions at the time that 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 the history of prior volume surges, including their magnitude (i.e., the level that the SBV indicator reached).

Our charts are unique in that they give traders the opportunity to choose the specific chart settings that best fit their personal trading styles and risk tolerances. Traders can thus develop and test their own trading systems. On our charts, you can scroll back in history to test any system that you have created.