Larry Connors’ 3 Day High/Low Method Trading Strategy (Is It Still Effective?)
In this post, we backtest Larry Connors‘ 3 day high/low Method/Strategy. How has the strategy performed since it was revealed in his book in 2009?
The 3 day high/low method/strategy performed well in Connors’ book, and it still works pretty well today 12 years later.
The basic principle of the strategy is to but when an ETF has made lower highs and lower lows for three consecutive days. In plain English, the strategy is like this:
- Today’s close must be higher than the 200-day moving average.
- Today’s close must be lower than the 5-day moving average.
- Two days ago both the high and low were lower than the day before.
- Yesterday the high and low were lower than the day before.
- Today the high and low are lower than yesterday.
- If conditions 1-5 are true, then buy today at the close.
- Exit at the close when the close is above the 5-day moving average.
The most-traded ETF, the S&P 500 (SPY), has the equity curve shown below.
We publish the overall rules of all the strategies presented in Larry Connor's book and the most-traded ETF, the S&P 500 (SPY) backtest here >>
https://www.quantifiedstrategies.com/larry-connors-3-day-high-low-method/