What is the difference between a Exchange traded fund and a index fund?

Maurice R asked:

I am 21 and i ma looking to put my money back to work for me this year. I was told that my best bet is to invest in a index fund that track the S&P 500. However i am also being told that Exchange traded funds (EFT) are the way to go. I would like to know what is the main differences between the two. Any help at all would be greatly appreciated.

Emily

Profitable ETF Trading Strategies – Focusing on a Single Stock Or ETF

Ken Long asked:

One of the regular traders in our trading mastermind has made a successful practice of focusing on just a few stocks and ETF’s in his short-term trading strategy. The rest of us have seen him develop an almost uncanny ability to anticipate his targets reactions to news, behavior at certain important price levels and generally stay in tune with the changing price action a day-to-day basis.

We asked him to go through some different ideas of what he looks for in order to develop his mastery and he was happy to share the following considerations with us. Take a look at these and you may discover that they can help you improve your trading as well.

Our master of focused trading examines the following things about but stocks and ETF’s he specializes in:
the relationship of the stock to the sector it is a part of the relationship of the sector to the market overall the targets relative volatility with respect to changing market conditions the targets relative volatility in terms of its own historical patterns and norms the targets behavior upon release of major news items and earnings events how the target behaves in response to economic news the relationship between the targets of volume and subsequent price action the relationship between volatility in subsequent gains Where the target is in the business cycle and in the equity curve cycle average performance statistics over various periods of time such as three days, 10 days, 30 days, quarters and year-to-date and 12 month trailing. Important price levels for support and resistance and major turning points in the past, especially those dealing with high volumes how the target behaves when the market is crashing or breaking out wildly to the upside whether the target is considered a defensive sector a growth sector or middle-of-the-road average statistics of overnight gaps and subsequent follow-through is the relationship between price action as it approaches popular moving averages such as the 20, 50, and 200 day moving averages any identifiable patterns based on time of day, day of week any patterns of price action that relate to options expiration dates pair trade possibilities between the target and other members of its business sector or the market in general whether or not the target is likely to be affected by regional news or currency events the strength of the correlation between the target and its business sector and regional ETF

He listed more than just these, but you can see from this already rapidly growing list just how much there is to know about any particular target. Knowing these details and having internalized them in order to be able to act quickly is an edge that it is not easy to offset.

Our mastermind has seen firsthand evidence of the power of focus, and so we suggest it as a strategy for you to consider in your trading.

Jesse

ETF Trend Trading – Hype Or Untapped Potential?

Ron Baramone asked:

It’s common knowledge in the investment world that with more potential for gain comes more risk; therefore generally the highest profit types of investment tend to be among the riskiest. That’s why I always like to keep an eye out for anything that can, if only slightly, stack the deck a little in my favor, and that’s where ETFs come in. If you’ve been actively involved in the stock market for any length of time, you may have heard the term ETF (or Exchange-Traded Fund) being tossed around lately. The popularity of this investment vehicle has grown tremendously in recent years, with a 26-fold increase in the ETF market to a current level of over 600 billion dollars. The main reason for the popularity of this type of fund is the relatively low risk-level, tax-efficiency, as well as their stock-like features allowing them to be traded with ease. And unlike many larger mutual funds, ETFs can often be more accessible to people with less capital.

Now, I don’t mean to portray Exchange-Traded Funds as some kind of miracle investment vehicle that you should throw all your money into, but they should definitely be considered a key component of a well-balanced portfolio.

If you do decide to look into the potential of this market, I would strongly suggest doing your homework before jumping in. This may seem obvious, but I know sometimes enthusiasm can get the best of even the best of us. There are a number of good resources and courses available on the topic which can help you get a better feel for the intricacies of this sort of investment fund.

For a serious investor, ETFs can provide a good opportunity to mitigate risk while still providing solid returns, even in a down market. If you’re the day-trading, trend following type this may allow you to stabilize your portfolio and generate some more steady returns without losing liquidity.

Before putting any of your money into ETF trading, it would be wise to invest in a good training course which can show you step-by-step how to turn a profit from this type of investment vehicle. Like any market, it’s best to approach ETF trading in a confident yet prudent manner; and in the end it’s probably better to spend a little money on learning how to do it right than risk that money on the market, doing it wrong.

Ronald

Exchange-traded funds?

Ken F asked:

I really don’t know much about investing, but I’ve got a some extra money on my hands and am thinking that now might be a good time to buy some exchange-traded funds like DIA or SPY. I just thought that since people seem to be selling everything now would be a good time to invest broadly in exchanges that have to rebound sometime. Is this a good idea, or insane?

Thanks for your help.

Beverly

Profitable ETF Trading Strategies – Understand Your Trader Quality Number

Ken Long asked:

The system quality number that is taught by the International Institute of Trading Mastery is a very powerful way of calculating a single number that describes the relative quality of a particular system, given a set of trading results that are typical for that system. It is a methodology that allows you to compare average results with typical volatility over a statistically significant data set to determine if there is a quantitative and qualitative difference between two systems.

The system quality number is a powerful idea as far as it goes. Many traders, however, discover that the actual results of the system they propose to trade come in different than those suggested by the back test. One of the important differences between back testing in forward testing with real money is the human factor of the trader himself and his affect on system performance.
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Sometimes the traders’ actions add value to a system. Frequently the traders’ actions take away value. The reasons for this can be numerous and varied and usually there is a combination of reasons why the trader degrades the performance of a particular system. It is normal for an inexperienced trader to overrule the specific system rules that add the most value to the new system.
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An example of this would be to refuse to take an entry signals because of a particular belief in where the market is going to go next. This will normally occur when you see the system rules putting you into trades that don’t make sense to your intuition. It may be the very counter-intuitive nature of the system that adds value to the results. If your psychology is aligned with that of the masses, then you will tend to overrule the system precisely when it is taking advantage of mass psychology.
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As a result of this phenomenon, it is useful to think of a trader quality number which incorporates the system quality number as modified by the traders’ actions.? Only by taking meticulous notes of when and where the trader deviates from the system’s rules can we determine if in fact he is adding or subtracting value. By examining the results from numerous examples of trader intervention, we can determine if it’s a good idea for the trader to have discretion or not when executing the system.
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It takes an incredible strength of will and character to take a look at the results of your own interventions and then act in a professional manner based on your analysis. If you can do that however, you have the fortitude and character to be a great trader.
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Know your trader?quality number as well as your system quality number and let that be your guide.

Tamara

Is selling stradle option on SPDR exchange traded fund(SPY) a good strategy?

raj k asked:

I am an individual investor who is currently using options on exchange traded funds for capital growth.I sell both put and call options on SPY (S&P500 index) close to the current market price. I also buy protective puts.I generally sell options two months out to maximise my return on investment. Can you advise me if it is a good and safe strategy?

Emily

Characteristics Needed For Successful ETF Trend Trading

Jacob J. L. Salinger asked:

ETF Trend Trading & Investing can be an intimidating process. ? Many of us would prefer to leave the “heavy lifting” to someone we perceive as a professional and check in occasionally to see how we are doing.? This approach can be profitable depending on the personalities involved.?

More likely, though, we are missing opportunities in the market on a daily basis.?

If you have the characteristics of a successful trader, taking the reins and participating in “etf trend trading” may be a better option.? Let’s quickly take a look at what the characteristics of a successful trader are so that you can begin to discover what style of investing may be right for you.

First of all, you need to be willing to follow the system of “etf trend trading”.?

A person who is too engaged, who wants to jump at every perceived opportunity and who cannot rein in their impulse to click their mouse is probably not going to find success.?

Another characteristic of successful traders is preparedness.? Having all your ducks in a row will make the process quick and smooth.? If you are well prepared, there is no need to spend hours at your computer puzzling out your next move.

Another point which corresponds to one’s ability to stay the course is emotional detachment.?

Thinking with your head and not your heart and seeing the long term, “big picture” benefits of a system will make you successful.? Along with this, successful traders have the courage of their conviction.?

With “etf trend trading”, you must know that you deserve prosperity and stay the course to that goal.? Finally, successful traders have had successful mentors.?

Look for someone who has?done well in the market?who can coach you along the way and encourage you to continue on track.

Characteristics needed for successful “etf trend trading” are part personality, certainly, but many of the needed skills can be learned if one is willing to apply themselves.?

Do your research carefully before you dive in to the market.? Seek advice from those you know to be successful.?

Finally, look to people with proven systems, like the folks over at trendtradingadvisor.info.? If you think you may have what it takes to trade successfully, now is the time to evaluate your options and start your journey to the prosperity you deserve.

Juanita