Trading Systems  |  JAN 2009

Three Rules, One Easy Way To Trade ETFs by Larry Conners and David Penn

Three Rules, One Easy Way To Trade ETFs by Larry Conners and David Penn Here’s a short-term trading strategy to trade exchange traded funds. A famous trader once remarked that he could publish the secrets to his winning trading strategy in the newspapers and no one would follow them. The key, this famous trader explained, was consistency and discipline. In our opinion, when it comes to trading and trading strategies, one of the things that makes consistency easier and discipline a bit less daunting is simplicity. With few exceptions, all the trading strategies we have developed over the years have had simplicity as their hallmarks. What we’ve developed in this latest trading strategy is short-term trading at its simplest. Instead of stocks, we focus on the smaller universe of market index exchange-traded funds (Etfs). We also created the system as long-only — no need to worry about borrowing shares of Etfs. And last but not least, we limited the strategy to three simple rules. THE DOUBLE 7'S Before we tell you those rules, first understand a bit about this trading strategy, which we call Double 7s. We tested this strategy on both the Standard & Poor’s 500 (Spx) and the Nasdaq 100 (Ndx) from January 1995 through April 2008. The results over that time period for the S&P 500 were +1,133 points, with nearly 80% of the trades closing profitably. In the Nasdaq 100, the results were similarly impressive. From January 1995 through April 2008, the Double 7s strategy in the Nasdaq 100 yielded 2,822 points, with 79.84% of the trades closing in the green.

by Larry Conners and David Penn