Trend Tracker Strategy
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Thomas Kee StockTraders Daily .com |
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In January I said short the Market. In February, I said buy it. That is the name of the game this year. Opportunities will exist on both sides. Although the follow through from February’s low has not been fulfilled to my expectations at the time I wrote this March Column, the increases were well underway.
Even though we profited handsomely from the oscillations in the Market already, many other investors sat idle, and had negligible returns. My concern is investors miss opportunities like this all the time, and this is a year where they will repeat, so none of us should miss out. My goal in this article is to offer a strategy that can be used all the time, regardless of market direction or economic conditions, or political concerns for that matter. That way, everyone can profit all the time. Another goal is to help everyone remove his or her emotions from the equation too.
Therefore, this strategy will not involve buying or shorting individual stocks at all. Instead, we will focus on ETFs. Investors become tied to stocks, when they know they should not be. I call this “Golden Handcuffs.” Many brokers use this tactic in conjunction with managed accounts. They point out the stocks in the portfolio, declare them best of breed, but fail to disclose that the stock prices of good companies go down too. The strategy I am proposing removes those handcuffs, because we use ETFs.
In order for investors to use a strategy effectively, it must also be easy, so that was a focal point at the onset. A complex strategy will not be implemented for very long. One of my primary objectives in creating this strategy was to Keep It Simple, and remove the risk of confusion.
The Strategy is called Trend Tracker.
Trend Tracker trades QID and QLD exclusively in conjunction with the NASDAQ. QID is the double short, and QLD is the double long. We are comfortable using the double ETFs because we are always in control of our risk. That is part of the simplicity.
Here is an example:
When support is tested in the NASDAQ, buy QLD and target resistance. When resistance is tested, take profits in QLD and buy QID. Then, when support is tested again, sell QID and buy QLD again. If ever support or resistance levels break, stop out immediately, to control risk. Repeat the process.
We have been using this strategy without QID and QLD for approximately 7 years, but in 2008, when they went public, we began using these ETFs exclusively. Prior, we used individual stocks, but stocks are not directly correlated to the market, so the model had skew prior to 2008. With these ETFs, Trend Tracker is now directly correlated to market fluctuations.
Trend Tracker can be used manually, but the automated version is much more popular. We have a contest running now; it is an ongoing contest with the paper-trading version, which will help everyone learn how to use the Strategy effectively. Visit our website, and review Trend Tracker on the right side.
Trend Tracker can be used in any market environment, regardless of economic conditions, and without sacrificing time or lifestyle. Best of all, it removes the emotions from this business. I think investors should use it every month, and this month is a great time to start.
Keep it Simple. If you do, you will realize returns without the associated risk.
Thomas H. Kee Jr. is President and CEO of Stock Traders Daily, founder of The Investment Rate, architect of the ATAP Program, and supporter of proactive trading strategies. His work can be found in Reuters, Barron’s, MarketWatch, and other Financial Media Channels.