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Selling Buying Volume Technical Analysis

Simple SBV Trading System Blog

Trading System - Friday, June 27, 2008

+4% (62 points) in 2 months

This week SBV technical analysis example is a continuation of previous example on June 20, 2008. In the last week's example we have explained the using of the trailing signal that would help to avoid a situation when the SBV oscillator moves close to the signal line, yet does not hit it to generate signal.

This example continues to illustrate this rule on the practice:

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.

1. Once the SBV indicator declines below negative signal level (the indicator will now show green), 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 green);
3. Once the SBV indicator rallies above positive signal level (the indicator will now show red), 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 red);
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 2: Trades based on the   5-rule (additional stop-loss rule) system.

Note: The 33% 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).

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