Beginners Introduction To ETF Trading System
The type of ETF trading system that a person chooses is going to be a personal choice that will involve many variables. Depending on whether a person wants to invest in a software program, subscribe to a service, do the research on their own, or use a system that they come up with. There basically is no standard system that everyone uses when they trade.
The effectiveness of any trading system that one uses will depend a lot on the type of trading they are doing and the baskets they are trading in. A system that is geared for long positions will not do as well in a short position sector. So, a trader who is diversified in Leveraged or other types of risky ETFs will want to be able to adapt their system to meet the needs of the sector they are in.
When selecting a system, it is important to remember that there is no magic trading system out there that will be effective all the time. When people start using a system that they have been told is the magic bullet they are disappointed and frustrated very quickly. The ETF is made up of millions of small moving parts that each affect the trades taking place. A system that may work for one person might not be as effective for another. Finding the system that works for you will be developed over a period of time as strategies and systems are tried and discarded or altered.
The easiest system to start with that provides minimal risk and will get a traders feet wet is the EMA system. EMA stands for Exponential Moving Average. It involves following trends, and has a pretty decent risk rating. The ETFs most traded using this system are TLT, XLF, SMH, RTH, and a few others.
The crux of the system is that when the fast EMA crosses above the slow EMA a trader goes long. When the slow EMA crosses the fast EMA, the trader goes short. The rule is that a person has to leave or reverse their position the date after the fast EMA and slow EMA cross. And, when the rules have been set up on the days for the EMAs to cross, usually fifteen, the trader needs to stick to them.
Even this simple system will require that a person do the necessary research on each sector and follow their trends to make effective trades. It is important to set buy and sell limits so that one does get caught up in trading and lose more than they intended.
Setting up a risk allotment will also be important. Setting a percentage of the total capital one is going to risk on a position then moving when the threshold is reached will be beneficial. Adding to an account once it has crossed the threshold is not advantageous to gains. Setting the number of losing trades that one will have in a row and the percentage that will be cut back after that threshold is crossed will also avoid slipping into losses.
The most effective ETF trading system will be the one that works for the individual using it. When looking at different systems one must be as analytical as when they are planning on trading in a sector. Find out the consistent success of the system and how it worked in the sector that one is considering using it in. By discussing systems and strategies with a person who has knowledge of ETFs, trading strategies and systems, a person will be able to achieve successful trading within a short time. - 23217
The effectiveness of any trading system that one uses will depend a lot on the type of trading they are doing and the baskets they are trading in. A system that is geared for long positions will not do as well in a short position sector. So, a trader who is diversified in Leveraged or other types of risky ETFs will want to be able to adapt their system to meet the needs of the sector they are in.
When selecting a system, it is important to remember that there is no magic trading system out there that will be effective all the time. When people start using a system that they have been told is the magic bullet they are disappointed and frustrated very quickly. The ETF is made up of millions of small moving parts that each affect the trades taking place. A system that may work for one person might not be as effective for another. Finding the system that works for you will be developed over a period of time as strategies and systems are tried and discarded or altered.
The easiest system to start with that provides minimal risk and will get a traders feet wet is the EMA system. EMA stands for Exponential Moving Average. It involves following trends, and has a pretty decent risk rating. The ETFs most traded using this system are TLT, XLF, SMH, RTH, and a few others.
The crux of the system is that when the fast EMA crosses above the slow EMA a trader goes long. When the slow EMA crosses the fast EMA, the trader goes short. The rule is that a person has to leave or reverse their position the date after the fast EMA and slow EMA cross. And, when the rules have been set up on the days for the EMAs to cross, usually fifteen, the trader needs to stick to them.
Even this simple system will require that a person do the necessary research on each sector and follow their trends to make effective trades. It is important to set buy and sell limits so that one does get caught up in trading and lose more than they intended.
Setting up a risk allotment will also be important. Setting a percentage of the total capital one is going to risk on a position then moving when the threshold is reached will be beneficial. Adding to an account once it has crossed the threshold is not advantageous to gains. Setting the number of losing trades that one will have in a row and the percentage that will be cut back after that threshold is crossed will also avoid slipping into losses.
The most effective ETF trading system will be the one that works for the individual using it. When looking at different systems one must be as analytical as when they are planning on trading in a sector. Find out the consistent success of the system and how it worked in the sector that one is considering using it in. By discussing systems and strategies with a person who has knowledge of ETFs, trading strategies and systems, a person will be able to achieve successful trading within a short time. - 23217
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