How to Avoid Getting Whipsawed Near the 200-Day
More on today’s Daily Battle Plan discussion on the 200-day moving average.
What is the rule of thumb for avoiding ETFs near the 200-day ma? Our research has found it to be 1.5% away from the 200-day moving average (2% can also be used). Therefore if an ETF is 1.5% within its 200-day, you will avoid putting on an initial signal. If you’re scaling into a position, and let’s say the first unit is 2.7% away and you buy, if the second signal moves to be only 1.2% away, you’ll hold the first unit until the exit signal is triggered and not take the second signal as its within that 1.5% range.
I’d recommend you looking at a few charts for examples, especially from the past few weeks to further understand this.
Special Note on the New ETF Book: Our new book, High Probability ETF Trading will be released in digital format tomorrow (just in time for the weekend). If you ordered the book, you’ll receive notice by email tomorrow how to download it. The hard copy of the book will be mailed to you as soon as it is back from the printers in late June.
The book has seven quantified ETF strategies in it and each strategy can be used to trade both on the long side and the short side of all ETFs. If you haven’t ordered your copy yet and wish to, you can call 1-888-484-8220 ext 1 or click here. You’ll be included in the group who will have access to the new book tomorrow.
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.