Emini. S&P 500. Russell 2000. Futures. Charts.

1. Once the SBV indicator has advanced above plus 66% (the SBV indicator will show red), wait for it to decline below that level, then enter a short position;
2. Take profits once the price / index has declined to your pre-determined profit target level OR when the SBV indicator drops below minus 66% (the SBV indicator will show green), whichever occurs first;
3. Take losses if the price / index rises above your pre-defined stop loss level.

In the example below, you can see how this trading system was used to go short the S&P 500 e-mini. In this example, a 5-point decline was pre-determined as a satisfactory profit target; an advance of 5 points was set as the stop-loss level.

Chart 1: Establishing a short position based on the SBV indicator.
S&P 500 E-mini. VMA1 = 15-min

Important: The 66% level for the SBV indicator was determined in relation to the prevailing market conditions at the time the examples above were selected. In order to establish the optimal critical levels for the SBV indicator, a trader 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). Furthermore, it is important to look at more than one chart and to use multiple timeframes. For instance, while a volume surge may look imposing and appear to be critical on a 2-hour or a 1-day chart, the very same surge may not look nearly as significant on a 5-day chart. A prominent surge appearing on a 1-day chart could well affect index levels and bring about a one to five point reversal. In contrast, a prominent volume surge on a 5-day chart may prompt a reversal of 5 to 10 points.