ETF Trading Strategies – The Secrets to a Successful Trade

Dany Capello asked:

There has been many books written and a lot has been said about ETF trading in general. There are also a number of books that talk about ETF trading strategies but there is probably no one complete book that describes ETF trading from A to Z. The knowledge however you get from these books can help you become a better ETF trader by helping you hone your ETF trading strategies. You also get to learn a lot especially from the mistakes from others.

If you want to come up with a good solid and winning ETF trading strategies you need to first have a bit of experience in the ETF market. It will also do a great deal of good if you have some one or somebody who can teach you the about ETF trading strategies. The basis of a good ETF trading strategy is that it takes many things including good information into consideration.

Learning from other people’s experience is good because it will save you a lot of money, and time when it comes to developing a winning strategy. The best way to learn is from stories of other people’s success as well as their mistakes. Your job is to go and use what they tell you to develop your own unique trading style which can be adapted to the every changing ETF trading market.

The ETF market is never the same its always changing and its really hard to predict even for seasoned traders who have spent their life in the market. The trends however will tell you a little about what you can expect and how you should tailor your ETF trading strategies to make maximum profit. So in a way your strategy needs to be able to quickly be adjusted to the changing market.

People who have been ETF traders for a few years begin to have their own style of trading. Some styles my seem a bit unique while others will appear to look great. However these styles are based on the trader’s own unique experiences and knowledge. Yes in the ETF market you can experience extreme lows and extreme highs but this is something even the pros experience, you however need to make a profit in the long run in order to be successful.

The ETF trading strategies you come up with needs to be designed in a way that makes it so flexible that you can would it to your taste and requirements. You also need to be able to accomplish this as soon as possible before the market takes another turn.

People who have traded and have made alto of money often fail later on because they were not able to keep up with the changing market. So you also need to find a way to compensate for that. The market will change as it has always changed but your sense of the market should keep you ahead of the game. So come up with a strategy that you can really use and mould to your advantage.


Profitable ETF Trading Strategies – Developing the Daily Trading Plan

Ken Long asked:

Trading the markets on a daily basis with short term strategies places a premium on efficiently and effectively developing a comprehensive daily trading plan.

Short term trading can be a very rewarding part of an overall trading and investment strategy. Without a sound and comprehensive plan, though, there are just too many ways to go astray for the novice trader.

Each trader should develop their own methods for daily preparation, suited to their style and personality. It can be a challenge though for the novice trader to get started with this daunting but essential task.

Here is a simple way that a trader might go about developing a daily trading plan, proceeding from the top down.

Prepare your notes in 3 sections: market, intermediate, tactical (short term) and go through a set of structured questions like these:

What is the market condition, what is it doing, does it give you a bias for tomorrow?

What is the intermediate condition? Consider using indicators like Williams%R, portfolio exposure, and ADX condition.

Are there any swing trades that have stories going on that carry over from the previous day?

What is the short term condition/ideas of interest? consider: gap statistics, SPY Pivot Points, any carry over positions from yesterday, any patterns fired? These could include patterns like overreaction, channelling, triple screen, 5 days down and washout.

Are there any maximum pain candidates to be aware of? Are there any continuation patterns that I am especially interested in?

Once you answer those questions, you should have anywhere from 5 to 15 tradeable ideas as soon as the market opens.

At the open you should consider the gap, then the 5 min Opening Range, examine the price with respect to the pivot point numbers.

After about 15 minutes into the session, you could look at, in order: indexes, ETF2 positions, and your developed interest list to see where the strength and weaknesses are. This quick scan will suggest more targets.

A simpler alternative is to have a narrowed focus on a stable of reliable targets, and do an abbreviated version of the above scan by considering the market and intermediate conditions but then focus on the state of each of your reliables for trading ideas.

All interest list members should be framed in the usual way, so you have a decision support framework in place before the market opens. You will then know where you can buy upon evidence of tactical momentum fearlessly.

You will also have a playbook of situational trades, just waiting for the market to show you what it is doing.

If you need some guidance on how to develop your daily short term trading plan, these ideas may help to get you started.


ETF Trading Strategies Explored – Be the First to Know

Mark Brian asked:

Strengthening portfolios, by trading ETFs is a common occurrence among investors today. Portfolios are packed with bonds, stocks, representatives of a stock collection or commodities from a specific sector. There are financial ETFs, bond ETFs, oil ETFs, and also gold ETFs. Using ETF trading strategies to further the growth of your investments might be just what you are looking for. The following information describes various strategies used among investors of Exchange Trade Funds.

Placing Bets on Sectors – Betting on entire sectors at once isn’t uncommon today. Many investors prefer to place bets on stocks of a specific kind instead. Let’s say an investor wanted to keep an eye on the euro, whereas his comrade prefers to follow all currency ETFs. This is an example of one investor focusing on an individual stock, while the other monitors a whole sector.

Options for Bond Betting – Bets are able to be made on anything that can be tracked by an index. Tracking of this kind can be used for segments of a yield curve, corporate bond indices, or Treasuries with inflation protection. There is a relationship between the maturity time and the interest rate on borrowed money in a give currency.

The Strategy of Pairs Trading – An algorithmic trading strategy is the basis for pairs trading today. This strategy is built around models which decide on the amount of spread, based on data mining and historical analysis.

The term hedging is used when referring to stocks and its derivatives that have pairs trading going on between them. When one stock goes up and the other goes down, the one that went up is sold. After selling the stock that traded up, the stock that went down is purchased. This swap is done with the thought that since one went down, it must be getting ready to go back up. Trade pairs may include companies such as Wal-Mart and Target, Dell and Hewlett-Packard, or Pepsi and Coca-Cola.

Industry Emphasis – The weight of portfolios can be shifted towards specific industries by buying ETFs within the same industry or sector base. Having a broad-based ETF and then buying a health-care ETF will bring about health care industry exposure to your portfolio.

Predicting the Market – Being able to predict what will happen on the market, with ETFs, enables investors to buy or sell with confidence. Timing the market is the strategy of deciding to either buy or sell stock by also trying to predict what the future of the market will be. Predictions are based on either conditions within the economy or from the result of a fundamental analysis. This strategy is based on an aggregate market prediction instead of a specific financial interest.

Making sure you understand these ETF trading strategies described above will make you a more knowledgeable investor.