From Short Term Pullback to High Probability ETF Trade: The Case of EWH
When it comes to high probability ETF trading, the results of our research are clear: buying the selling and selling the buying is a quantified way for the average, retail trader to take advantage of the same kind of edges that professional traders have known and traded successfully for decades,
Maybe you’ve been trading stocks and have been thinking about trading exchange-traded funds (ETFs). If so, then this might be a great time to not just add a new asset class to your trading business, but also to add a totally new, high probability trading method, as well.
Consider how an ETF like the iShares MSCI Hong Kong Index ETF
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PowerRating), the most widely-traded exchange-traded fund representing Chinese stocks, was trading back around the middle of June. The ETF had reached $14.60 per share near the beginning of the month, but had since fallen significantly. By mid-month, EWH was down almost 10% from that early June high.
Did EWH look like a buy to you?
It did to high probability ETF traders. Using one of the 7 strategies in the new book by Larry Connors and Cesar Alvarez, High Probability ETF Trading — or perhaps the online software by the same name — high probability ETF traders were able to take advantage of the short term weakness in EWH to buy shares of the fund “on sale.” Buying the selling — just as the research suggests.
And when it comes to closing out long trades, our research tells us to exit on strength (“selling the buying”). With high probability ETF trades, we use a variety of dynamic exits — from the 2-period RSI to short term moving averages. Here, in the example of EWH, high probability ETF traders could have taken advantage of profitable exits using either of those two technical tools.
With markets pulling back here at week’s end, short term traders should be increasingly sensitive to the potential for short term trading opportunities like these — as profit-taking turns to panic selling, and big pullbacks become new opportunities for high probability trades.
Join Larry Connors live, Monday at 1:00 pm for a special presentation for our upcoming Swing Trading College. The Swing Trading College remains our number one, most popular course and this is the seventh time we’ve offered it. The class runs 14 weeks and covers short term trading of stocks, ETFs (3 weeks of ETFs), options, E-minis and building a full trading plan – along with 4 weeks of live trading.
In this class Larry will be also introducing for the first time a new high probability stock trading strategy, along with trading additional strategies to trade ETFs including Leveraged ETFs.
If you’d like to attend the presentation, you can register here.
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