Profitable ETF Trading Strategies – Sources of Psychological Pressure For Mechanical Traders

Ken Long asked:

A lot of professional traders manage the complexity of the human psychological dimension of trading by removing their emotional judgment as much as possible from the system. ? They know that they cannot completely eliminate their psychology from their trading, because they know some or all of the following issues will continually come to the surface of their attention for resolution. Each of these common occurrences are likely to generate considerable psychological pressure that must be addressed even with the best mechanical system around: ?

1. the purpose and objectives of their system

2. their appetite for risk

3. their capacity to manage the risks that they get (often more than their appetite)

4. their own response to the system’s performance

5. the response of their significant others to their system performance

6. a changing market that seems to have altered the availability and frequency of normal returns on capital (when you see other people making “easy money” and you are not, the temptation to intervene is large).

7. their response to client concerns and ideas if they are professional money managers.

8. a willingness to look for new opportunities and edges in changing markets

9. a need to feel personally connected to your trading

10. a need to feel that you are responsible for your winning results, through your own actions and decision-making

All of these issues will become an integral part of the psychological dimensions of your trading. Some are positive and some are negative, and some depend on the particular results your mechanical system is getting. Each one though puts pressure on you to change your rules to accommodate the emotion that it generates. ?

It takes a special kind of preparation and discipline to be able to trade a proven, back tested mechanical system strictly according to its rules.? We are not naturally inclined to follow these kinds of systems which leads to so may decent systems being cast aside unfairly. Be prepared as a trader to manage these pressures. Notice I didn’t say resist, because resistance creates its own problems later down the road. It is necessary to anticipate and then manage these emotional responses for the long term health of your system, your self and your bottom line.?


Understanding the Basics of Gold ETF Trading For the Next Decade

Steve Crown asked:

Gold ETF Trading is one way to leverage your portfolio and take advantage of the gold market. The acronym ETF stands for exchange traded funds and provides the investor a means to constantly receiving income regardless of the economy. Further, the commodity of gold has proven historically reliable regardless of the economy.

The first area to more fully understand when becoming engaged in gold ETF trading is the gold mining stocks index. Mining stocks with respect to gold are viewed by many as volatile and risky: Many investors are finding gold mining stocks with regard to the index are below long term investment levels. Since the ETF proves to be a shorter term investment vehicle than that of a mutual fund housing your gold inside this type of financial vehicle is the best way to minimize any market volatility.

The next area to consider with respect to Gold ETF trading is the gold stocks index not to be confused with the prior that being the gold mining stocks index. If you’ve been charting gold activity you may have noticed over the last decade or so that the gold stocks index is indeed testing long term levels of support. Normally when gold stocks close below the trend line the longer term investors find themselves with cash until new opportunities with respect to trading gold on a short or long term basis come into play.

In analyzing performance certainly within the past five years particularly between the years 2006 to 2008 gold stocks have underperformed. When you are watching performance this type of thing is not generally encouraging to gold ETF trading investors as the objective should be to see higher prices. However everything must be taken into consideration if you are to be a true analyst with respect to investing and gold stocks are reaching levels where rallies have since the time been put into place. This means gold stocks may be underperforming historically as far as price but close to proper support levels.

The chart to stay apprised when becoming involved in Gold ETF Trading is the daily HUI chart. The chart allows the gold ETF investor to modify his or her entry and exit strategies. In example, one month the HUI showed a lower high and lower low which is critical. Sometimes lower prices for gold are ways to panic the selling market to increase their rate of sell off. Rallies are good ways to get things stabilized.

Even if you find gold stocks have been selling in a down position, gold historically holds its own: it still provides the investor with higher highs and higher lows in a discouraging economy. Gold ETF further still holds its ground with respect to long term support.

Generally even if gold indexes and gold stocks are over extended with regard to sales in the end gold produces leverage. It may be preferable to see a higher price however if things happen where this is not the scenario, gold continues to move and therefore trading in gold has always been historically secure regardless of economy.