Before the market opened on Tuesday, Larry Connors addressed subscribers trading along with his Daily Battle Plan:
“5 consecutive days lower and the market is more than ready for a bounce. We’ll look to take advantage of it on the short side should it rally today.”
This suggestion was the beginning of a two-stage scale-in on the short side of the ^QQQQ^. The market did rally on Tuesday – and again on Wednesday – allowing traders to buy not just one, but two units short in the increasingly overbought exchange-traded fund (ETF).
By the first few hours of trading on Thursday, only a few days later, the wisdom of this high probability ETF trade became apparent. Stocks and ETFs began selling off early on Thursday and, while most markets ended the day off their worst levels, the damage had been done by the time the closing bell rang.
The S&P 500? Down more than 1%.
The Nasdaq? Down more than 1%.
Traders following Larry Connors’ Daily Battle Plan?
Up 1.32%. With traders who used options or substituted leveraged versions of the QQQQ (such as the ^QLD^) for the QQQQ likely locking in even larger gains.
This modest trade in the PowerShares QQQ Trust ETF was another example of high probability trading at work. By waiting for markets to become extremely overbought before selling short, high probability trading strategies such as those used in Larry Connors’ Daily Battle Plan are able to achieve high-win rate/high-accuracy rates with minimal drawdowns.
This successful trade in the QQQQ brings the Daily Battle Plan to a record of 81%, with 58 correct trades out of 72 since October 2008.
To find out more about high probability trading and to join Larry Connors every morning before the market opens for professional market insights and the sort of high probability trading set-ups available only through TradingMarkets, click here to launch your free, one-week trial to Larry Connors’ Daily Battle Plan today.
David Penn is Editor in Chief at TradingMarkets.com.