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E-Mini Index Futures:
Trading with the SBV Indicator. An Example for the Russell 2000 E-mini.


July 18, 2006

We applied the following 4-rule trading system which is based on our SBV indicator:

  1. Once the SBV indicator declines below minus 33% (the indicator will now show green), we will enter a short position (if we are not already short);
  2. Once the SBV indicator advances above minus 33% (after having been below that level), we will enter a long position (the indicator still shows green);
  3. Once the SBV indicator rallies above plus 33% (the indicator will now show red), we will enter a long position (if we are not already long);
  4. Once the SBV indicator declines below plus 33% (after having been above that level), we will enter a short position (the indicator still shows red).

    To protect profits and reduce losses, the following rules were added:
  5. Use an eight-point gain as the pre-determined, satisfactory profit target;
  6. Adhere to a three-point stop-loss level;
  7. Exit all positions by the end of the session.

    An additional rule for the first trade of a session:
  8. Because the previous night’s futures session can exert a strong influence on the market’s opening level, we do not initiate our first trade of the session using rules #1 and #3.

    An additional rule for a session’s last trade:
  9. If less than an hour remains in a session, refrain from opening any new positions.

Any number of additional rules may be added to this system – it all depends on your personal trading style and risk tolerance. We strongly believe any trading system should be fine-tuned to fit a trader's personal style, needs, and risk tolerance.

Chart 1: Trading the SBV indicator using a 4-rule system.
Russell 2000 E-mini. 1-day view. VMA1 = 15-minutes.

Date Trade
Motivations
Index Decision Date Trade Motivations Decision Index Profit
(points)
07/18/06
09:44
Rule #4 686.80 Sell Short 07/18/06
11:20
Rule #2 Buy to Cover 678.90 +7.9
07/18/06
11:20
Rule #2 678.90 Buy 07/18/06
11:35
Rule #4 Sell 779.10 +0.2
07/18/06
11:25
Rule #4 779.10 Sell Short 07/18/06
11:51
Rule #3 Buy to Cover 681.20 -2.1
07/18/06
11:51
Rule #3 681.20 Buy 07/18/06
11:56
Rule #4 Sell 680.50 -0.7
07/18/06
11:56
Rule #4 680.50 Sell Short 07/18/06
12:13
Rule #2 Buy to Cover 678.80 +1.7
07/18/06
12:13
Rule #2 678.80 Buy 07/18/06
12:55
Rule #4 Sell 679.10 +0.3
07/18/06
12:55
Rule #4 679.10 Sell Short 07/18/06
13:27
Rule #2 Buy to Cover 676.40 +2.7
07/18/06
13:27
Rule #2 676.40 Buy 07/18/06
14:50
Rule #4 Sell 681.70 +5.4
07/18/06
14:50
Rule #4 681.70 Sell Short 07/18/06
15:13
Rule #2 Buy to Cover 680.00 +1.7
07/18/06
15:13
Rule #2 680.00 Buy 07/18/06
15:59
Rule #4 Sell 685.40 +5.4
07/18/06
15:59
Rule #4 685.40 Sell Short 07/18/06
16:14
Rule #7 Buy to Cover 686.20 -0.8

Total:   

+27.2

Important: A trigger level of 33% for the SBV indicator, a 6-point profit target, as well as a 2-point stop-loss were determined in relation to the prevailing market conditions at the time the above examples were selected.

In order to establish the optimal critical levels for the SBV indicator, as well as to set appropriate profit targets and stop-loss levels, traders should first review their personal trading style and risk tolerance. They would also do well to review the current market situation, and to scroll through a chart history to study prior volume surges including their magnitude (i.e., the level the SBV indicator reached).


More Examples:
Date E-mini Number of Trades
April 23, 2007 Russell 2000 E-mini 1 "Short" trade
April 17, 2007 S&P 500 E-mini 3 "Long" and 3 "Short" trades
February 17, 2007 S&P 500 E-mini 3 "Long" and 3 "Short" trades
February 2, 2007 S&P 500 E-mini 4 "Long" and 4 "Short" trades
January 23, 2007 Russell 2000 E-mini 3 "Long" and 4 "Short" trades
December 19, 2006 S&P 500 E-mini 3 "Long" and 2 "Short" trades
December 11, 2006 Russell 2000 E-mini 2 "Long" and 2 "Short" trades
November 29, 2006 Russell 2000 E-mini 4 "Long" and 4 "Short" trades
August 11, 2006 S&P 500 E-mini 2 "Long" and 1 "Short" trades
July 19, 2006 Russell 2000 E-mini 4 "Long" and 5 "Short" trades
July 18, 2006 Russell 2000 E-mini 5 "Long" and 6 "Short" trades
July 17, 2006 Russell 2000 E-mini 2 "Long" and 3 "Short" trades
July 11, 2006 Russell 2000 E-mini 5 "Long" and 3 "Short" trades
July 10, 2006 Russell 2000 E-mini 4 "Long" and 5 "Short" trades
July 7, 2006 S&P 500 E-mini 3 "Long" and 3 "Short" trades
June 28, 2006 S&P 500 E-mini 1 "Short" trade
June 26, 2006 NASDAQ 100 E-mini 1 "Short" and 1 "Long" trade
June 23, 2006 S&P 500 E-mini 1 "Short" trade
June 22, 2006 S&P 500 E-mini 1 "Long" trade
June 21, 2006 S&P 500 E-mini 1 "Short" trade
June 20, 2006 S&P 500 E-mini 1 "Short" trade
June 19, 2006 S&P 500 E-mini 1 "Long" trade
June 14, 2006 Russell 2000 E-mini 1 "Long" and 1 "Short" trade
June 13, 2006 S&P 500 E-mini 1 "Short" trade
June 9, 2006 Russell 2000 E-mini 1 "Long" trade
June 8, 2006 S&P 500 E-mini 1 "Long" trade
June 7, 2006 S&P 500 E-mini 1 "Short" trade
June 6, 2006 S&P 500 E-mini 1 "Long" and 1 "Short" trade
June 2, 2006 S&P 500 E-mini 2 "Long" trades
May 17, 2006 Russell 2000 E-mini 2 "Long" and 3 "Short" trades
May 5, 2006 S&P 500 E-mini 2 "Short" trades
April 26, 2006 Dow E-mini 1 "Long" and 1 "Short" trade
March 30, 2006 NASDAQ 100 E-mini 2 "Long" trades

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