Connors Double 7 Strategy: Your Beginner’s Guide to Algo Trading Success

Are you ready to elevate your trading game with a proven strategy that’s simple, effective, and beginner-friendly?

The Connors Double 7 strategy is robust trading approach with a win rate of over 76%, designed by the legendary trader Larry Connors and published in 2008, which is great because it gives us 16 years of out-of-sample data.

In this guide, we’ll break down how to use this method step-by-step, explain its key metrics, and show you how to optimize it for maximum gains. Let’s dive in!

What is the Connors Double 7 Strategy?

The Connors Double 7 strategy is a mean-reversion trading method that involves just three simple rules:

1. Entry Rule: Buy when the price hits a 7-day low.

2. Exit Rule: Sell when the price reaches a 7-day high.

3. Filter Rule: Only trade when the asset’s price is above its 200-day simple moving average (SMA200).

This simplicity makes it perfect for beginners, while its high performance and robust design have made it a favorite among professional traders.

Why the SP500 Index is Ideal for This Strategy

The SP500 index is perfect for implementing the Connors 7-7 strategy, especially for algo trading enthusiasts seeking consistent results because of the index tendency to drift upwards with shallow drawdowns most of the time.

I’ve demonstrated this phenomenon in detail on my YouTube channel in several videos. This is why mean-reversion strategies like the Connors Double 7 thrive on the SPY ETF or @ES futures—both of which are derivatives of the SP500 index.

While this strategy can be applied to other assets like the Nasdaq or Dow Jones, or even global indices, the SP500 remains the best choice for testing and implementing the Double 7 strategy because of its consistent performance.

" The strategy is extremely simple: basically, we wait for a seven-day low to go long, and we will exit when we hit a seven-day high."

Ali Casey

How to Apply the Strategy (Step-by-Step)

Here’s how you can start trading with the Connors Double 7 strategy:

1. Set Up Your Chart:

   • Load @ES futures or SPY ETF daily bars in your trading/charting platform.

   • Add the SMA200 to your chart.

2. Identify the Entry Signal:

   • Look for a closing price that’s lower than the lowest close of the last 6 days.

3. Monitor the Exit Signal:

   • Sell when the closing price exceeds the highest close of the last 6 days.

4. Use Strategy Filters:

   • Only take trades where the price is above the SMA200.

Testing Environment:

• SP500 index traded via SPY ETF derivative

• Historical Data: 1995-2025

• Factoring in trading fees of $5 per trade for realistic results

A table showing Connors Double 7 Strategy performance vs Buy & Hold strategy on the SP500 index

Key Metrics and Results

The Connors Double 7 strategy boasts the following metrics:

• Win Rate: 77.1%

• Net Profit: $204,331

• Maximum Drawdown: 16.2%

This strategy offers significantly lower drawdowns than buy-and-hold investing, making it easier for traders to stay consistent without the stress of major portfolio dips.

For example:

• Buy-and-hold can result in drawdowns exceeding 50% during major market crashes.

• With Connors Double 7, drawdowns remain manageable at less than 17%, allowing traders to use leverage safely to achieve comparable returns.

The next test will use a futures derivative with leverage built into the instrument.

Testing Environment:

• SP500 index traded via @ES.D derivative

• Historical Data: 2007-2025

• Factoring in trading fees of $30 per trade for realistic results

A table showing Connors Double 7 Strategy performance vs same strategy with an added filter vs Buy & Hold strategy on the SP500 index.

The original strategy doesn’t hold up well against the buy & hold for the same period tested. The filter (200SMA) for the original strategy is very basic, testing other filters (direction, volatility, volume, patterns) gives us many better options. The table above includes a better volatility filter, enhancing all metrics vs the original strategy and buy and hold.

Optimizing the Connors Strategy

While the default rules work well, optimization can provide better stability and returns.

Simple Optimization Steps:

1. Entry Condition: Test 1-14 day lows.

2. Exit Condition: Test 1-14 day highs.

3. Filters: Keep the SMA200 as your main filter.

By testing these variations, you can find a balance between trade frequency and performance stability. For example, a 3-6 day lookback can increase trades while maintaining solid results in a stable area.

Pro Tip: Stick to stable parameters and avoid optimizing too aggressively. This ensures your strategy remains robust across different market conditions.

3D surface graph showing the Net Profit of the strategy in relation to optimized values of Entry/Exit lookbacks.

Below are the metrics for basic strategy with 3-6 lookback + 200SMA, compared with the same strategy 3-6 lookback + a simple volatility filter.

" What's amazing about this strategy is it was published in 2008, and since then, all results have been out of sample."

Ali Casey

A table showing Connors Double 7 Strategy performance vs same strategy with a volatility filter on the SP500 index.

Below is the equity curve of the (3,6) lookback strategy with a simple volatility filter.

Equity curve for Connors Double 7 Strategy with a volatility filter on the SP500 index.

Common Mistakes to Avoid

As a beginner, watch out for these pitfalls:

1. Over-Optimization: Avoid fine-tuning the strategy too much—it may work well in backtests but fail in real markets.

2. Ignoring the Filter: Strategy filter is the best way to enhance strategy performance, way better than profit target and stop loss.

3. Unrealistic Expectations: This is not a get-rich-quick scheme; focus on building robust strategies and combining them with other uncorrelated strategies in a portfolio, for consistent gains.

The Connors Double 7 strategy is a proven, beginner-friendly approach to trading. With its simple rules, high win rate, and robust performance, it’s an excellent way to start your algo trading journey.

Good luck and happy trading!

Questions & Answers

1. What is the Connors Double 7 Strategy?

The Connors Double 7 Strategy is a mean-reversion trading method that involves buying an asset when it hits a 7-day low and selling when it reaches a 7-day high, provided the asset's price is above its 200-day simple moving average.​

2. How effective is the Connors Double 7 Strategy?

Many traders have reported a win rate of over 75% with this strategy, especially when applied to indices like the S&P 500. However, individual results can vary based on market conditions and execution.​

3. Can the Connors Double 7 Strategy be applied to assets other than the S&P 500?

Yes, while it works well with the S&P 500, traders have also applied it to other indices, ETFs, and individual stocks. It's essential to test the strategy on different assets to ensure its effectiveness.​

4. What are the risks associated with the Connors Double 7 Strategy?

Like any trading strategy, there are risks, including potential drawdowns and periods of underperformance. It's crucial to backtest the strategy and use proper risk management techniques.​

5. How can I optimize the Connors Double 7 Strategy for better performance?

Some traders adjust the entry and exit parameters or incorporate additional filters, such as volatility measures, to enhance the strategy's performance. However, over-optimization can lead to curve-fitting, so caution is advised.​

6. Is the Connors Double 7 Strategy suitable for beginner traders?

Due to its simplicity and clear rules, the Connors Double 7 Strategy is considered suitable for beginners. However, it's essential to understand the strategy thoroughly and practice it in a simulated environment before live trading.