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Short SPY Trading Strategy for ThinkOrSwim

Short SPY strategy by Connors and Alvarez for thinkorswim

The Short SPY Trading Strategy for ThinkOrSwim

The short SPY trading strategy comes straight out of Larry Connors’ & Cesar Alvarez’s book called “Short Term Trading Strategies that Work” and it’s the one strategy that they present for shorting. I’ve really been enjoying programming and testing some of the ideas presented in their book — a lot of which seem to have some merit — so I wanted to go ahead and share some of the work I’ve been doing with my readers.

The default settings that the trading strategy comes with are straight out of the book on page 106, and seem to perform very well in my own tests, but they can be easily customized and tested with different values using the strategy properties menu. This is useful for quickly backtesting the strategy with different instruments, time frames, and market conditions.

The original strategy in the book calls for no stop to be used, but I went ahead and added the option for a percentage based stop to make the strategy more applicable to different trading styles and time frames.

Results from thinkorswim strategy backtests can easily be exported and analyzed further in Excel or other spreadsheet programs simply by right-clicking on a strategy signal on the chart and clicking “Export” in the popup menu.

The Authors’ Stats:

  • Instrument: SPY
  • Win Rate: 68.75%
  • # Trades: 16
  • Points gained: 169.91
  • Avg. Holding Time: under 5 days

What You Get

  • Short S&P strategy file for thinkorswim from page 106 of the book
  • All parameters are customizable in the properties menu
  • Option to use a stop or not to use a stop, and to set the size in %
  • Customizable colors

Why You Want It

  • The high win/loss ratio on the SPY and other instruments makes it an easy strategy to trade from a psychological standpoint
  • Includes the option to add a stop, which makes the strategy even more easy to trade
  • Ability to quantitatively backtest the strategy on multiple instruments, timeframes, and conditions affords more peace of mind and encourages traders to fully trust in their system.

How it Works

The strategy is straightforward: just make sure the market is under the 200 day sma, and then if the market makes 4 new higher closes, sell the market and cover once it drops below its 5 day sma. Traders can optionally add a percentage based stop to the strategy (simple option in the properties menu) and customize how big the percentage stop should be.

 

$69.99 $49.99 Add to cart

 

Short SPY Trading Strategy for thinkorswim
Short SPY Trading Strategy for thinkorswim
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The TRIN Strategy for ThinkOrSwim

Connors and Alvarez TRIN SPY strategy for thinkorswim

The TRIN Strategy for ThinkOrSwim

According to Larry Connors and Cesar Alvarez in their excellent book, “Short Term Trading Strategies that Work“, the TRIN is a very popular indicator but few people have taken the time to quantify whether or not it can provide a trader with edge. With that in mind, the authors tested and developed the TRIN strategy for the SPY which I’ve programmed here for the ThinkOrSwim platform.

The TRIN was originally created by Richard Arms as the Arms Index but has become known as the TRIN. The basic calculation is as follows: (advancing issues / declining issues) / (advancing volume / declining volume). Readings above 1 tend to occur when markets decline, and eventually can lead to oversold conditions, and readings above 1 tend to occur when markets rise, and eventually lead to overbought conditions.

The Authors’ Stats:

  • Timeframe tested: 12 years
  • Instrument: SPY
  • Win Rate: 75.56%
  • # Trades: 90
  • SPX points gained: 558.30
  • Avg. Holding Time: under 4 trading days

What You Get

  • The TRIN strategy file for thinkorswim
  • All parameters include the default settings from the authors that gave the above results when the authors tested it
  • All parameters are customizable in the properties menu, including SPY sma length, TRIN threshold, etc.
  • Customizable market hours
  • Option to use a percentage-based stop or not to use a stop
  • Specify the size of stop to use, if any
  • Customizable colors

Why You Want It

  • The extremely high win/loss ratio on the SPY and SPX, as demonstrated by the authors, makes it an easy strategy to trade from a psychological standpoint
  • Option to add a stop makes the strategy even more easy to trade
  • Long-only strategy further makes it suitable for almost anyone, regardless of the type of account they trade out of
  • Ability to quantitatively backtest the strategy on multiple instruments, timeframes, and conditions affords more peace of mind and encourages traders to fully trust in their system
  • The ideas behind this strategy and its edge can be taken and further customized to your trading style to create a unique edge that only you know about

How it Works

The TRIN strategy works as follows: if the SPY is above its 200 day sma (indicating a primary uptrend), and the 2-period RSI of the SPY is under 50, and the TRIN closes above a reading of 1 for 3 consecutive days, a buy signal is issued. A sell signal is issued when the RSI(2) of the SPY closes above an overbought reading of 65.

 


$69.99 $49.99 Add to cart

 

The TRIN strategy for thinkorswim
The TRIN strategy for thinkorswim

 


$69.99 $49.99 Add to cart