The original Vbbee system

Product: Long and Short TNA

INTRODUCTION

The original system is developped by the stockbee member Vbbee. It is a simple system suited for working people who don’t have the time to monitor the markets all day long. The system can be traded on a long and short basis. The product that’s being used is TNA, but Vbbee says you can trade it with any 1,2 or 3 x etf you like (for example, Spy, SSO, TWM, …) as long as you understand the importance of position sizing and the importance of personal psychology.

The system is always in the market, but that doesn’t mean the man is in with 100% of the portfolio. Vbbee uses a 1.5 x ATR stop that is calculated on 14 days. The stop is calculated by taking the entry price and substracting this by the stop mentioned above. The risk he takes is 6%, but members could also take 4% or less, based on their risk appetite.

Of the record: Vbbee designed some shortcuts which can be used by more advanced members. Each night he plays around with some numbers in the excel sheet. If those numbers (in 4%+/-) have to be extremely “extreme” the next day to turn the tide around, he already acts on it by buying at the last hour of the FTD, because the chance that there is going to be a major revearsal will be practically zero.

Al you need for this system is the readings from Telechart for the 4% plus and 4% down days, the 10-day breadth and the 5-day breadth ratio.

Easyguru now also calculates the 5 and 10 day breadth in his MM, so for members without the TC software it is also possible to trade this system. Just check the tab “MM” and you are ready to go. A better idea however is to calculate the values yourself (to get a feel, in Vbbee’s words) and to use some colors. After a while you can almost act on the colors alone ;)

Now, let’s begin setting this baby up, shall we ;)

Chartmill

HOW TO SETUP THE VBBEE SYSTEM YOURSELF

Allright, for this system you need two important things:

1. A TC package (Gold is ok!)

2. Excel or spreadsheet software

1) Telechart Gold

Go to the website of Worden and subscribe for Telechart Gold. The same explanation can also be found on the stockbee.biz website!

If you subscribe, don’t download the TC 2000 version, but download the Telechart 2007 package instead. You can find this by clicking on the products > Download TC 2007.

Now you can enter the formulas for calculating the 4% plus and 4% down numbers. The 5 and 10 day breadth are calculated using your excel software.

1.1) Calculating the 4% plus values

1. In TC 2007 Choose New > New Personal Criteria

2. Give a name for the formula (MM 4% Up Daily)

3. Fill in the formula: (100 * (C - C1) / C1) >= 4 AND V >= 1000 AND V > V1

4. Click Safe

5. Choose New > EasyScan

6. Click on Watchlist and choose “Common Stocks”

7. Click on New Condition

8. Choose MM 4% Up Daily

9. Save

10. Go to Databank (menu) > Update Personal Criteria (update all)

Each day you can check the numbers by going to:

1.1) Calculating the 4% down values

Do the same for the 4% down values and give it the name MM % Down

( 100 * (C - C1) / C1) <= ( - 4) AND V >= 1000 AND V > V1

2) Excel software

For calculating the 5 and 10-day breadth you need some spreadsheet software like Excel. For this system you only need 4 columns: 4% plus,4% down, 5day, 10day breadth.

At the end of each day (after market close) you fill in the values for 4% plus / down above the first row. The numbers for the 4% down / up can also be found on the stockbee.biz website (MM). So can always double check the numbers or use them if you don’t have a TC package.

Other criteria (like primary indicator - 25%, …) can also be included to backtest some things, but be carefull that you don’t over-do it. The system still has to work in the future, so don’t curve fit!

5-day breadth =SUM($B2:$B6)/SUM($C2:$C6)

The 5-day breadth uses the sum of 5 days of 4% Plus data divided by 5 days of 4% down data. If 4% plus days are higher, the ratio will be higher and vice versa.

10- day breadth: =SUM($B2:$B11)/SUM($C2:$C11)

The 10-day breadth uses the sum of 10 days of 4% Plus data divided by 10 days of 4% down data. If 4% plus days are higher than 4% down days, the ratio will be higher and vice versa.

HOW AND WHEN TO ENTER?

The long signal

If you got the things set up we can begin looking at the entry. As we said the system is constantly in the market (unless we are stopped out of course. We then simply wait for the next signal).

There is a buy signal if the 5-day ratio rises above 2.0, with a Follow Thru Day. A follow-thru has nothing the do with investors.com. It just means that you have to check the 5-day breadth ratio at the end of the next day. If the 5 day breadth is above 2.0 you have a follow thru day. You can then enter the next day at the open.

You stay long until you got stopped out, or get a sell signal (to go short).

If you reach 20% after entry (in the 3 x ETF) you take 50% profits of the table.

Profit Target = Take 50 % profit when Target (entry * 1.20) is reached. For the remaining 50% you wait until next signal (or stop out).

An example:

The Short Signal

If you look carefully at the screenshot above, you notice that we don’t exit our position on the “Sell Signal”, but only after it launched an official Follow Thru Day!

A sell signal is issued when the 10-day ratio drops below 2.0. The FTD of a short signal is also not the same as for a long signal! Both 5 and 10-ratios have to drop below 2.0 in order to qualify for a FTD. If those criteria are met, you can exit your long position and go short.

The stop is also calculated by adding (because now we are short) a (14 day ATR * 1.5) from the entry price. In the next topic we show you how to do this position sizing.

We take 50% of the table if our short target of 10% from the entry price is reached. We stay in the remaining 50% position until we got stopped out, or we get a signal switch.

HOW MUCH TO BUY?

Vbbee uses a 6% risk based on an ATR stop of 14 days, multiplied by 1.5 but you can choose your own risk based on your own risk tolerance and personality.

In order to calculate the amount you can buy, you need to now the Average True Range over a period of 14 days. ATR is mostly used as a guidance for a stop, because it’s based on the volatily a stock shows over a period of time.

To know the ATR:

1. Surf to (or another stock website)

2. Fill in TNA

3. Choose in the list of indicators Average True Range and “update”.

4. Multiple the number you see by 1.5

5. Use the position Sizing Tool to calculate the values. In this case you see the calculation for a short stop.

HOW TO SETUP UP YOUR DAILY PLAN

1. Check the values in TC 2007 at the end of the day

2. Fill them in, in Excel

3. Calculate the values of the 5day / 10 day breadth

4. See if you got a signal.

5. Wait for confirmation (a FTD)

6. Don’t buy or sell before seeing an official FTD.

7. Respect your stops.

Perhaps you can use some kind of a bracket or combined order. Always place a GTC stop. Place a profit target for your long and short positions.

Good luck!

Chartmill, Michel.