Trading Quantified Pullbacks and Quantified Trends with The Machine
Of the many features of The Machine® that have impressed early adopters and beta testers, the ability to build quantified portfolios using both high probability mean reversion strategies and back-tested, trend-following strategies may be near the top of the list.
Many traders and investors have long believed that when it comes to mean reversion or trend following strategies it was an “either/or” game. Recently, Larry Connors and the Connors Research team have, for the first time, integrated mean reversion strategies and trend following strategies into high probability, high performance portfolios using The Machine.
Why Mean Reversion Strategies?
For more than a decade, Larry Connors and Connors Research have shown that for short term traders of equities and equities-based markets, mean reversion strategies can produce higher per trade win rates with only a moderate exposure to the market on a day to day basis.
Mean reversion trading strategies are based on taking advantage of markets when they reach extreme levels. After thousands and thousands of simulated trades in hundreds of widely-traded stocks and exchange-traded funds (ETFs), Larry Connors has shown that per trade accuracy rates of nearly 70% are possible using strategies based on buying markets after they have pulled back, and selling them after they have recovered. With exchange-traded funds – including leveraged ETFs, those accuracy rates can be even 10% higher or more than they are with stocks.
Why Trend Following Strategies?
Mean reversion strategies help traders buy stocks and ETFs after short-term sell-offs and sell them after short-term rallies. Although mean reversion strategies typically have high per trade win rates, these strategies often have little exposure during periods of exceptionally low volatility – such as during extended bull markets.
Because of this, Larry Connors and Connors Research have developed and tested a set of quantified, trend following strategies available exclusively to traders and investors using The Machine. And while these trend following strategies are based on a different set of trading principles from the mean reversion strategies, they share with all of the trading strategies from Connors Research the same level of robustness — in terms of the back-testing, statistical rigor, and ease of use.
The Machine®: Mean Reversion and Trend Following Quantified
Combining mean reversion strategies with trend following strategies is a major milestone for Connors Research and The Machine. For decades, the vast majority of the trading and investing public has had to choose between which of the two trading approaches to use. And, up until now, no one has quantified publicly available trend following strategies. This has made it that much harder for traders and investors to build the kind of trading and investing portfolios they really desire. This has also made it difficult for traders and investors to adjust their strategies to adapt to new market conditions – such as low volatility bull markets and often violent bear market corrections.
If you are interested in learning how The Machine can help you build a high performance portfolio of mean reversion and trend following trading strategies that you control, a back-tested, quantified portfolio that has produced the historical results you want, then click here to register for a free online webinar by Larry Connors.
There is a webinar event this month. Space is limited and the first webinar filled up quickly, so click here now to reserve your spot today.
David Penn is Editor in Chief at TradingMarkets.com.