Understanding Good ETF Trading Strategies
As an investment vehicle that can promise a consistent -- and sometimes exceptional -- rate of return on investment (ROI), exchange traded funds can really deliver. Getting a handle on ETF trading strategies will be necessary, though, before jumping into investing in ETF's in any meaningful way. There are a few things to know, first of all, about exchange traded funds.
In a way, an ETF is similar to a mutual fund in the way it is constituted and run by a fund manager. Usually, though, almost every exchange traded fund limits its membership to what are known as institutional investors. This means large investors capable of buying and selling big blocks of stocks known as creation units. There are ways, though, for small investors to get in on the action through a trading system.
Think of ETFs as similar to corporate stocks, also, because of the way they are bought or sold or traded and you'll be well on the way to understanding the general principles that underlie these funds. Just about every one of these funds also tracks one of the major market indexes such as the S&P 500, so following trends or tracking trends can be one good way to set up a trading strategy.
There are more strategies out there that can probably be counted, though they usually fall into a couple of major categories; fundamental and technical. For those with the savvy, or patience, to sit down and learn technical strategies, the rewards can be quite lucrative. Most traders using technical indices believe they can discern patterns or shapes in a stock chart, basically.
For those with the ability to pick out shapes and patterns in market movements -- by analyzing a stock chart -- the possibility of good income is very real. These movements can signal upward and downward movement in markets that can be timed through technical analysis, with the correct buy and sell orders put in at the right times.
Probably one of the most ubiquitous strategies when it comes to technical trading is to employ what traders call a moving average cross. These crosses attempt to line up the short-term movements in the price of a stock or a fund and then place that short-term movement over a long-term trendline in the market or the stock. Short-term movements over-- to 25 days can establish the moving average line.
Once the moving average line can be established, traders then take that line and lay it over the analysis of the short-term movements in order to pick out the actual movement in the price of a stock or asset such as held in an ETF will result in after the stock crosses over the moving average line. The second part involves long-term trends, which use a 50 day moving average in order to smooth out the short-term trend.
Employing this strategy, traders can look at trends in the long-term and develop the moving support line. Those who are skilled at this strategy can pick out the right time to buy a stock at the bottom of its upward climb or at the point when the stock has touched or lightly penetrated the 50 day average. One can also use it to sell the stock short in an effective manner. Money is usually made on the margins. - 23199
In a way, an ETF is similar to a mutual fund in the way it is constituted and run by a fund manager. Usually, though, almost every exchange traded fund limits its membership to what are known as institutional investors. This means large investors capable of buying and selling big blocks of stocks known as creation units. There are ways, though, for small investors to get in on the action through a trading system.
Think of ETFs as similar to corporate stocks, also, because of the way they are bought or sold or traded and you'll be well on the way to understanding the general principles that underlie these funds. Just about every one of these funds also tracks one of the major market indexes such as the S&P 500, so following trends or tracking trends can be one good way to set up a trading strategy.
There are more strategies out there that can probably be counted, though they usually fall into a couple of major categories; fundamental and technical. For those with the savvy, or patience, to sit down and learn technical strategies, the rewards can be quite lucrative. Most traders using technical indices believe they can discern patterns or shapes in a stock chart, basically.
For those with the ability to pick out shapes and patterns in market movements -- by analyzing a stock chart -- the possibility of good income is very real. These movements can signal upward and downward movement in markets that can be timed through technical analysis, with the correct buy and sell orders put in at the right times.
Probably one of the most ubiquitous strategies when it comes to technical trading is to employ what traders call a moving average cross. These crosses attempt to line up the short-term movements in the price of a stock or a fund and then place that short-term movement over a long-term trendline in the market or the stock. Short-term movements over-- to 25 days can establish the moving average line.
Once the moving average line can be established, traders then take that line and lay it over the analysis of the short-term movements in order to pick out the actual movement in the price of a stock or asset such as held in an ETF will result in after the stock crosses over the moving average line. The second part involves long-term trends, which use a 50 day moving average in order to smooth out the short-term trend.
Employing this strategy, traders can look at trends in the long-term and develop the moving support line. Those who are skilled at this strategy can pick out the right time to buy a stock at the bottom of its upward climb or at the point when the stock has touched or lightly penetrated the 50 day average. One can also use it to sell the stock short in an effective manner. Money is usually made on the margins. - 23199
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posted by X - Men @ 2:25 AM
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