The method I use to select which ETFs to scale-in to is called TPS. TPS stands for Time, Price and Scale-in and has been the backbone of our ETF trading for over a year now. In the Daily Battle Plan Model Portfolio, it has triggered 46 signals of which 38 have been correct since Oct 1, 2008. This type of high probability trading is in line with the backtesting which goes as far back as 1993 in ETFs.

The key to trading TPS is consistency in one’s plan of execution. There are only three steps to TPS: buy when the signal triggers, scale into the position further as the next signal triggers, and exit the position when the exit signal triggers, This is what the Daily Plan Model Portfolio has been doing since last year and is why more than 80% of the trades have been successful.

Within these three simple rules, is the human element of execution. And this is where every trader comes in. Many hundreds if not now thousands of traders use TPS and apply these three simple rules. But very few achieve the exact same results as the systematic way of trading. Those who do, trade it as it is (they see the trade, and they take the trade). Some have found ways to make it even better by taking the main TPS principles and applying additional concepts to them. And then there are some that for whatever reason, override the rules and trade it on a discretionary basis (they often lessen the performance of the systematic rules).

TPS remains the number one ETF Trading Strategy available to traders today. No one else has been able to publish an ETF strategy that has held up in testing every year since the beginning of ETF trading in 1993 and TPS continues to do well as we have seen in the model portfolio over the past year. Read the rest of this entry »