Tuesday, December 1, 2009

ETF Trading Strategies

By Patrick Deaton

There are many different ETF trading strategies that can be employed to ensure that an individual is making the greatest profit on their investment. Some of these strategies are designed for an individual who wishes to have constant or daily contact with the ETF trading portfolio. Other strategies are designed for individuals who want to maintain a long term ETF as part of a mixed portfolio.

A popular trading strategy is the Buy and Sell Points strategy. A trader using this strategy will need to do some research and analysis on the sector or company that they are considering trading. However, this strategy has proved very successful for most traders. Once the buy and sell points have been set a trader is not required to deal with the trade again until it hits its buy or sell point.

Investing time and effort in finding the realistic and accurate buy and sell will require the trader to use many tools. Some of these tools include analytical graphs and charts that help to compile historical data. There are many websites that offer different types of calculators that provide assistance in developing the types of trend data that is needed.

The data collected will reveal trends and patterns from a historic perspective. A trader will be able to calculate when the highs and lows occurred for that sector or company, what their historic price for stock was, trading volume and other data that will help the trader to spot important trends that occur on a regular basis.

This strategy relies heavily on technical indicators for reliable information regarding trends and patterns. It is important that the trader compile as much historical data as possible about the sector. In doing this the trader will be able to more accurately calculate when a blip will occur on that sector's market. This is especially useful if a sector experiences an extreme low every year at the same time. By selling during the high and buying during the low, an individual can general more revenue than they would if they had ridden out the low.

Through the effective use of analytical tools and data a trader can get a visual representation of a sector or company's performance over a period of time. When performing the historical data and compilation of factors that determine the buy and sell points a trader does not consider any fundamental factors regarding the sector or companies within it.

When trades are made with this strategy they are based purely on the trends and patterns revealed in the technical data. A trader who has an interest in a company or sector for person reasons must be able to divorce themselves from their personal feelings for this strategy to be effective. Many times new traders find this very difficult to do and often find themselves reacting to predicted drops in the market too late to recoup the rewards that they could have.

Talking to professionals and successful ETF traders is very helpful when deciding on the best ETF trading strategies to explore. When one selects the strategy that best meets their needs they will find that the gains are extremely beneficial. An individual who takes the time to do the necessary research and learn the techniques to be successful can take advantage of many opportunities that are available to ETF traders. - 23210

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