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Larry Connors' Daily Battle Plan:

Getting into ETF Trades 101

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Companies:o iShares MSCI Hong Kong Index

o iShares FTSE/Xinhua China 25 Index

Topics:o ETFs

o Investing Ideas & Strategies

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Symbol Price Change

EWH 16.16 -0.08

FXI 41.94 -0.24

{"s" : "ewh,fxi","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""}

David Penn, On Friday April 23, 2010, 9:11 am EDT

A market that has been rallying for day after day after day suddenly stops, reverses and

 begins to pull back. If you are a high probability trader, then you know that this is thekind of market environment you have been waiting for. Moreover, you've subscribed to

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 Larry Connors' Daily Battle Plan and have read a Market Intel report that points to a pair 

of ETFs that have become exceptionally oversold.

Maybe the ETFs have fallen for two days in a row and are looking likely to close downfor a third. Maybe the ETFs have developed 2-period RSIs of less than 15 - or even less

than 5. Maybe the ETFs have earned ETF PowerRatings upgrades to 9. Or even 10.Whatever the reason, you arrive at the Battle Plan home page and after perusing the

market analysis, you read this line:

"Buy the first of potentially up to three units in ... if the ETF closes lower today."

That line is the "gentlemen start your engines" of high probability ETF trading in Larry

Connors' Daily Battle Plan. And as of October 2009, those engines are roaring. Since

adding ETF trading to the Daily Battle Plan a year ago, the service has gone 42-8. Our most recent trade, a play on the iShares FTSE/Xinhua China 25 Index (NYSE:FXI -

 News) in early October, gained nearly 5% in a matter of days.

See: "Battle Plan Reaches 84% Correct as Traders Lock in Gains in SPY, FXI"

Let's take a look at the three main components of high probability ETF trading in Larry

Connors' Daily Battle Plan. Understanding how these components work is critical tomaking the most out of the service and to keeping the edges on your side as a high

 probability trader..

"Buy the first ..."

High probability ETF trading in Larry Connors' Daily Battle Plan is about buying

 pullbacks in trends. Our quantified approach to trading tells us that we should look to buyour first piece of a high probability ETF position AFTER the ETF has become oversold

above the 200-day moving average. Conversely, if you are looking to sell short, then your strategy is to sell short the first piece of a high probability ETF position AFTER the ETF

has become overbought below the 200-day moving average.

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Up more than 5% in less than 5 days, this short trade was one of the bigger winners in

the Larry Connors' Daily Battle Plan this spring.

"... if the ETF closes lower today."

Our strategy when buying ETFs for high probability trades is to take positions on theclose. In the same way that we look for intraday weakness to take positions when buying

stocks on pullback, we want to see ETFs that we are interested in buying close at their oversold extremes. This is a way of assuring - as much as possible - that we are truly

"buying the selling" and taking as much advantage as possible of the historical edges that

support buying oversold markets and selling overbought ones.

Isn't it time you gave the high probability ETF trading strategies of  Larry Connors' Daily

 Battle Plan a try? Click here to launch your free, 7-day trial today. After 50 high

 probability ETF trades with 42 profitable exits over the last year, this is the kind of 

trading edge that more short term traders need to know.

82% winning trades! Find the best ETF setups with Larry Connors' Daily Battle Plan, ahighly accurate trading service with daily entry and exit signals for ETFs. Get your free 7

day trial now - Click Here.

 David Penn is Editor in Chief at TradingMarkets.com.

For more trading strategies, go to TradingMarkets.com/reports.

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How to Bring In Additional Income from

ETFs, Part 2

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Companies:o SPDR S&P 500

Topics:o ETFs

o Investing Ideas & Strategies

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Symbol Price Change

SPY 121.25 +0.23

{"s" : "spy","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""}

Larry Connors, On Friday April 23, 2010, 9:04 am EDT

Last time we looked at putting on credit spreads on ETFs in order to potentially bring inadditional income in ETFs (to read Part 1 of our article, click here.).

Today, let's look at a more aggressive and potentially more profitable way to take in

additional income. This is done with Ratio Spreads.

Instead of me writing a long tutorial on Ratio Spreads for those of you who are unfamiliar with it, I'd suggest you do a search and you'll see many good options sites that do a good

 job describing what they are. What I'd like to do here is show you how to potentially use

them when we have our ETF signals.

Let's go back and use the SPY example from yesterday. Let's assume the SPY is at 77and we have a sell short signal today. Yesterday we learned we could put on a credit

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spread by selling the 77 calls and protecting ourselves by buying an equal amount of 79

calls.

In a Ratio Spread, you would be more aggressive. You would potentially sell two or three, 77 calls and buy one 79 call. If you're wrong , you'll be fully protected on one of 

your 77 calls and partially protected on the remaining piece as the 79 call will startgaining value faster as it moves further in the money. A more conservative version of this

is to sell three 77 calls and buy two 79 calls. thereby gaining greater protection.

The key to understanding this is that the lower the ratio, the lower the risk and lower the

 potential gains. The higher the ratio, the greater the risk and the higher the potential

gains. As I mentioned yesterday, this strategy is especially appropriate with high

 probability set-ups (those you believe will be correct at least 70% of the time) in highlyliquid ETF options like the SPY's.

Options Spread trading is an excellent strategy to use to bring in additional income in

ETFs. If you decide to go the Ratio Spread route, please make sure you understand therisks involved because they are greater than the risks with credit spreads.

On Monday we'll look at how to bring in income in ETFs that are moving sideways.

With 82% winning ETF trades in the model portfolio from October 2008 through March2010 – you too can realize this level of success with Larry Connors' Daily Battle Plan.

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