Recently, I was asked a very good question from a gentleman who is long FXI from the Daily Battle Plan. He asked if it would have made sense to have added to his position intraday yesterday instead of waiting for the close.
The answer to this is that based upon the historical test results, adding to long ETF positions at lower prices at the close is better than trying to pick an intraday bottom.
Yesterday’s intraday trade would now in hindsight look very good. But when you look at tens of thousands of trades like this as we do, you’ll see that there’s no way of knowing where a bottom is intraday (FXI could have just as easily sold off even further throughout the day, giving an early buyer a healthy loss in that position). Therefore, scaling in at lower prices on the close is in our opinion the best way to enter an ETF position.
For stocks, it’s a bit different and I’ll cover that topic next.
Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.