PowerRatings and Profit-Taking: Exiting High PowerRating Trades
Click here to read the most recent PowerRatings analysis, “More Strategies for Entering Trades in High PowerRatings Stocks.”.
Buying the selling and selling the buying … that’s how Larry Connors, founder and CEO of TradingMarkets has characterized his high probability, mean reversion approach to short term stock trading.
What does this mean? It means that when looking to buy stocks that will outperform in the near term, we look to buy those stocks that have experience the most aggressive selling.
Our research, involving thousands of simulated stock trades going back to 1995, shows that stocks that have pulled back — and pulled back severely — above their 200-day moving averages tend to outperform the average stock over the next few days.
Larry and his research team have incorporated these insights — along with several others — to develop a rating system — PowerRatings — that can help short term traders spot those stocks that are most likely to move higher in the short term. This is opposed to many stock trading strategies that tend to be very good at identifying stocks AFTER they’ve made significant moves.
So if that’s what buying the selling means, what does it mean to be selling the buying?
By selling the buying, we are talking mostly about exits, and specifically the idea of exiting on strength. Because we look to buy high PowerRatings stocks after they’ve moved lower, our goal is to sell them as they recover and resume the advances they had been in before their corrections.
This approach to trading is called mean reversion trading and has been a very popular and very successful way that professional traders have made money trading stocks for decades.
For more tips on how to trade PowerRatings stocks, read Larry Connors’ strategy primer: How to Find the Best Stocks to Trade Every Day.
Right now, with the markets having advanced over the past few days, there are ample opportunities for traders who picked up shares of high PowerRatings stocks over the past week to be looking for opportunities to take profits. Of the stocks I have mentioned in recent columns — particularly the 5 PowerRatings Stocks for the Next 5 Days columns — stocks like Intel
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Others, such as Amgen
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Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of more than 14 to 1 after five days. Click here to start your free, 7-day trial to our Short Term PowerRatings!
David Penn is Editor in Chief at TradingMarkets.com.