How to Systematically Trade a Fear-Driven Market

During the recent market selloff which began with the largest one-day drop in more than four years, Raptor II continued to make new equity highs. That's because the Raptor II trading system is designed to capitalize on extreme oversold conditions in individual stocks. So while most "experts" and the media were warning of a market meltdown, leading investors to sell stocks at precisely the wrong time, Raptor II was building a list of potential buy candidates. What followed was a typical "mean reversion" bounce that took our own trading account to new highs over the next few days. The market proved yet again that opinions are no match for statistics.

What is Raptor II?

Raptor II has been one of our best-selling trading systems. One good reason for this is that it has achieved the highest gains per winning trade of any strategy we have published to date. Raptor II identifies deeply oversold, usually event driven, mis-pricings in individual stocks. It does this by waiting for stocks to drop substantially, then triggering an entry signal once the sellers have been washed out, and the professionals move in.

This type of market action has existed for many decades, but until Raptor II, no one to our knowledge has developed a method to trade these moves in a systematic way. Raptor II uses a well-defined set-up to identify entries. And it also uses a well-defined set-up telling you when to exit. While there have been different systems that have traded oversold conditions, we do not believe that any of them have had the test trade results that Raptor II has.

Historically, going back to 1995, 75% of trades have been profitable, showing an average gain per winning trade of greater than 11% (based on simulated results*).

How to Trade Raptor II

There are three different ways Raptor II can be traded: as individual stocks, on a portfolio basis, or with options. The choice is up to you, so that you can select the style that best suits your own trading methodology.

Individual Stocks

• Decide for yourself how many stocks you want to trade
• Decide for yourself how many shares you want to trade
• Use a different exit strategy
• Apply your own money management/position sizing techniques

Structured Portfolio

• A balanced portfolio allows you to control your risk
• The benchmark 10-slot portfolio:
  • Divide your account into 10 slots ($50,000/10 = $5000.00)
  • When a trade is initiated, it occupies 1 slot ($5000.00)
  • With the benchmark Portfolio you should never have more than 10 open positions

Trading with Options

• Long Call Options -- basic way to use options w/ Raptor II
• Front Month -- Average trade lasts 5 Days
• Out Of The Money Strike Price (potentially the biggest gains)
• Deep In The Money Strike Price (high premiums)

Recent Trades

We trade Raptor II with our own account, and since releasing the system our account has steadily grown, hitting new equity highs last week -- when most investors were suffering a drawdown in their own accounts.

Here are some recent trade examples:

Raptor II Signals

Now, for the first time, we’re providing the Raptor II Signals through licensing rather than purchasing the system up front (usually $4995). The Raptor II Signals will provide you with specific entry and exit prices.

Click here for a free 2-week trial of the Raptor II Signals. To attend a live presentation on Raptor II by Steve Primo, TradingMarkets Director of Education, click here. If you have any questions, or would like more information, please feel free to email us at editor@tradingmarkets.com or call us at 213-955-58585 ext 1.

Ashton Dorkins is Editor-in-Chief of TradingMarkets.com.

*The simulated returns looked at a universe of over 6000 stocks. The data was obtained from outside sources which we believe are reliable but we cannot assure their complete accuracy. The tests were run on simulated limit order entries and market order exits that were triggered between January 1, 1995-December 31, 2006. One cent commissions were charged and cash balances assumed 3 month t-bill rates. Any dividends received along the way were not included in the test results.