Learn about TPS, one of our most powerful and popular high probability ETF trading strategies in this classic Larry Connors’ Trading Lesson from earlier this year.
As I mentioned in the Daily Battle Plan, last week was a very good week of trading for us. We scaled-in to long positions on ^IWM^, ^EWH^, and ^SSO^, and locked in the gains on the close on Friday afternoon ahead of the holiday weekend.
The method I use to select which ETFs to scale-in to is called TPS. TPS stands for Time, Price and Scale-in and has been the backbone of our ETF trading for over a year now. In the Daily Battle Plan Model Portfolio, it has triggered 46 signals of which 38 have been correct since Oct 1, 2008. This type of high probability trading is in line with the backtesting which goes as far back as 1993 in ETFs.
The key to trading TPS is consistency in one’s plan of execution. There are only three steps to TPS: buy when the signal triggers, scale into the position further as the next signal triggers, and exit the position when the exit signal triggers, This is what the Daily Plan Model Portfolio has been doing since last year and is why more than 80% of the trades have been successful.
Within these three simple rules, is the human element of execution. And this is where every trader comes in. Many hundreds if not now thousands of traders use TPS and apply these three simple rules. But very few achieve the exact same results as the systematic way of trading. Those who do, trade it as it is (they see the trade, and they take the trade). Some have found ways to make it even better by taking the main TPS principles and applying additional concepts to them. And then there are some that for whatever reason, override the rules and trade it on a discretionary basis (they often lessen the performance of the systematic rules).
TPS remains the number one ETF Trading Strategy available to traders today. No one else has been able to publish an ETF strategy that has held up in testing every year since the beginning of ETF trading in 1993 and TPS continues to do well as we have seen in the model portfolio over the past year.
The key to TPS is two-fold. The first is the strategy. The second, and this may be the most important, is the execution. Because without execution, there is no strategy. There’s just random actions, creating random results.
In a past Swing Trading College I traded a live $100,000 account based upon what they learned in class over the past four months. Every TPS trade we took was profitable over the past four weeks. A good part of the reason why every TPS was trade was profitable was because I executed the trades according to the rules.
I bought when the signal triggered, I scaled-in as those signals triggered and I exited when the exit signal triggered. I had a plan, put together with the class on how we were going to trade the account, and I executed the plan. Overall, (including the stock trading), 24 of the 27 trades we took were profitable. This is high probability trading as taught in the course. And more importantly, the lesson everyone in the class learned was to see the trade, take the trade. That’s what we did, and the results took care of themselves.
If you are going to trade on a full time basis, or if you already trade on a full time basis, you must learn to master See the Trade, Take the Trade. I don’t agree with the trading coaches who say that the strategies are not important, it’s the person executing the trade that’s most important. But, I do agree that superior trading strategies combined with a superior mind to execute trades, is the reason why the best traders succeed.
This is from Larry Connors’ Daily Battle Plan which he publishes each morning. If you’d like to take a free trial click here, or call 1-888-484-8220 ext. 1 to start your free trial today.
Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.