This week SBV chart example is based on the 5-day SBV(20) Nasdaq 100 chart.

+5% on the Nasdaq 100 in a week

Depending on the personal trading style a trader may select different timeframes and chart settings. If a trader is looking forward to make 2-3 trades a week he/she may use 60-day (1 bar = 1 hour) SBV Oscillator with bar period = 20. A trader willing to have more trades may select lower timeframes. The formula below may give you approximate trend lifespan which depends on the selected timeframe and indicator setting:

Expected Trend = [Bar Value] * [Indicator Bar Period Setting]

Example:

• If you are looking at 60-day SBV(20) you have a chart where 1 bar = 1 hour and SBV bar period is set to 20 bars. Furthermore, 1 hour x 20 bars = 20 hours (about 3 trading sessions) - you are trying to spot 3-day and higher trends.

• 5-day SBV(20) chart has 1 bar = 5 min and SBV Oscillator bar period setting = 20 bars. Furthermore, Expected Trend = 5 min x 20 bars = 100 minutes (1.5 hours) - may reveal 1.5-hour and higher trends.

Chart 1. Relationship between the SBV oscillator and
index reversal points. Nasdaq 100 index. 5-day view. 1 bar = 5 min. 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 declines below negative signal level (the indicator will now show red), 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 red);
3. 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);
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 green);
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.

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

Note: The 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.