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You are here: Home / Stocks / Commentary / Protecting Yourself from Market Declines, Part 2

Protecting Yourself from Market Declines, Part 2

August 31, 2009 by Larry Connors

As a follow-up to a previous Trading Lesson of the Day from the Daily Battle Plan, Bob B. who was kind enough to share his thoughts asking how to best protect ones portfolio in case of a market decline, followed up with another email to me.

Bob pointed out that TPS, which is the primary strategy we use to trade ETFs and is the primary strategy taught in the Swing Trading College of which he graduated this past spring, (for more information, click here) does a very good job of protecting ones portfolio in major market declines. Why? Because the main TPS strategy does not buy an ETF or stock under its 200-day moving average. This one rule alone, avoiding most securities under their 200-day, remains an excellent quantified guideline for traders and certainly did its job again last year. It’s been taught continuously by us since we first published its results more than 5 years ago.

The lesson we learned then and today is that the VXX is an excellent hedge to protect from market declines, as is avoiding securities under their 200-day ma.

Special thank you again to Bob.

Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.

Filed Under: Commentary, Recent Tagged With: declining market, hedge and protect portfolio, hedge portfolio, protect portfolio, stock selection, stock trading

About Larry Connors

Larry Connors has over 30 years in the financial markets industry. His opinions have been featured at the Wall Street Journal, Bloomberg, Dow Jones, & many others. For over 15 years, Larry Connors and now Connors Research has provided the highest-quality, data-driven research on trading for individual investors, hedge funds, proprietary trading firms, and bank trading desks around the world.

Larry has been published extensively, with titles like How Markets Really Work, Short Term Trading Strategies That Work, High Probability ETF Trading, and The Connors Research Trading Strategy Series including our latest Guidebook High Probability Trading with Multiple Up & Down Days.

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