More Strategies for Entering and Exiting an ETF Position
Recently, we looked at various ways to exit on the close when a set-up triggers. Today we’ll look at what to do when you can’t be there to enter or exit on the close.
The primary ETF strategy we focus on is a high probability strategy known as TPS. TPS was taught in our latest book High Probability ETF Trading, now in paperback, and is also taught in further depth in our TradingMarkets Swing Trading College, go to TradingMarkets.com to see more on our upcoming classes.
The TPS strategy has historically been correct from 84% to over 90% of the time in historical testing on a universe of over 100 ETFs going back more than a decade. The test results are based upon buying on the close and exiting on the close.
What happens if you can’t be there on the close? What happens if you can only place trades in the evening or before the market opens for the upcoming day?
The answer is that if that’s the way you trade, then you don’t need to change it. If you look at the historical test results using TPS, the open-to-open test results are a bit lower than the close-to-close. But not by much. Therefore, if you can’t be there on the close, you’ll trade on the next day’s open. After taking many trades trading like this, your results will likely not be much different than those who trade TPS on a close-to-close basis.
The key behind this is that you’re buying into the pullbacks and selling into strength. This is the single best quantified way I know of to trade ETFs and stocks and, as long as you are doing this, and using quantified results to guide you, you’re swing trading correctly.
The bottom line is if you can’t be there at the close, you can take the trade on the next day’s open.
Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.