By: delta0618 on Martedì 29 Novembre 2005 22:03
^Il trading system di Larry Connors#http://www.tradingmarkets.com/site/blog/display_blog.cfm?bid=6461C4E1-70B8-4C8E-A1B1785C49435A3C&blogid=42^
The Battle Plan Returns
As you may know, for 3 years I wrote a column entitled
"Connors Weekly Battle Plan." Each week we discussed new market research, new trading strategies, and various other important topics (such as the occasional not-so-normal parents I had to deal with from the Little League teams I was coaching).
The column was published both on TradingMarkets and on Yahoo!Finance. The nice thing about writing the column was the countless new people I had a chance to meet, many who I now consider friends.
Due to growing committments over the past year, I have not had the needed time to continue writing the column. But now with TradingMarkets adding the Trader Blogs, I will again be sharing some of our market research, new market strategies, and many of the interesting events which occur in our industry. And, because I'm still coaching (I'm one of the coaches for the city's 8U All-Star travel team...a great age to teach kids baseball), I'll again from time to time be able to share some stories which will likely be lumped under the heading "1001 Ways How Not To Behave In Public As A Parent."
The first question that comes to mind is where to start. Well, for me, that answer is easy...it's with the research. I'm going to use the blog to share existing research, plus new research. And, you'll be introduced to my two research partners, Cesar Alvarez and David Weilmeunster, who are amongst the best researchers I've met in this industry. Cesar was one of the Senior Programmers at Microsoft in the 1990's, helping create Excel. And David has two degrees from MIT (including one in Physics). When you put these two minds together, good things get created and along the way we'll share some of our market findings with you.
Today, I'm going to update a variation of a very simple strategy we published a while back. The point of showing you this is to show you that sometimes, "simple is better." As brilliant as Cesar and David are, both will tell you that the more complex the strategy, the greater the potential it has to fail. We usually try to keep things simple. We take what we believe to be inherent price characteristics and we look to create strategies around them.
Here's a very simple example of this philosophy. This strategy has 4 rules, yet it has been correct in the 80% range over the past decade. Here are the rules:
1. The S&P 500 is trading above its 200-day simple moving average.
2. Today, it trades (intra-day) at a 10-day low.
3. Today the VIX closes 5% or more above its 10-day simple moving average.
4. Buy the S&P 500 on the close and exit when it closes above its 10-period simple moving average.
How has this strategy done over the past 10 1/2 years? It's signaled 58 times. It's been profitable 81% of the time and it has picked up over 700 SPX points (while being in the market less than 15% of the time).
What about the Nasdaq? Same rules, except we use the NDX instead of the SPX. This has triggered 52 times since 1995. It's picked up 2100 Nasdaq points while being correct 77% of the time.
Why has this 4-rule set-up had so much success? One main reason and something you will see me continuosly advocate: THE EDGE ON THE LONG SIDE OF THE MARKET COMES AFTER MARKET WEAKNESS, NOT MARKET STRENGTH! THIS IS NOT SOMEONE'S OPINION...THE STATISTICS SHOW THIS OVER AND OVER AND OVER AGAIN.
This is a good place for us to start together. We'll build further from here as we progress. And if you have any thoughts or questions, please feel free to send them to me.
Have a great weekend!