New Trading Research For Your Weekend

  • August 13, 2004
  • TradingMarkets Editors

In this week’s lesson, we’re
going to show you a set-up that has been accurate exactly 75% of the time from
1994-2003 and has made money each year during that period.

The key to successful trading is to wait for
set-ups that have had large edges over a sustained period of time. There are
many of these set-ups available for traders and the key is to be patient and to
wait for them. Too many traders overtrade. They feel they need to take action as
much as possible, but in reality, the market doesn’t offer hundreds of
opportunities a day. It offers far less and the people who can wait for the
biggest edges tend to do the best.

Here is one example of a set-up that has had a
large edge that is worth waiting for. Here are the rules (and they are very
simple):

  1. The market (S&P 500) closes down 3 consecutive
    days in a row.

     

  2. The VIX closes more than 5% above its
    10-period moving average on the day the market has its 3rd consecutive down
    close.

     

  3. Buy the market at the close.

     

  4. Exit when the market closes above its
    10-period moving average.

     

The results:

This set-up has occurred 84 times from 1994-2003.
75% of the trades made money. The total S&P points gained was 824 points, which
surpasses the total points the S&P gained over the decade (and you were in the
market less than a quarter of the time!).

If you want to go one step further, add a 200-day
moving average filter (meaning you only buy when the market is above its 200-day
moving average). The results improve even more. The edge for this set-up also
exists in the Nasdaq.




You
can find information like this in the new book “How Markets Really Work”.
Written by money manager Larry Connors, it identifies over 800 common market
situations. You can take the edges it reveals and apply them to your trading.
Remember, one of the main keys to successful trading is knowing when to enter a
position that has a substantial edge. “How Markets Really Work” helps you find
these edges.

To order the book go to

www.tradersgalleria.com or call toll free
888-484-8220 ext 1.

Good luck with your trading!