By Terry Allen | Trend Trades Systems co-editor
Using the ETF as Your Best Stock Trading System?
The ETF (Exchange Traded Funds) concept was conceived about 16 years ago when the first one, nicknamed Spider, was introduced into the Stock Market. Today, there is a vast variety of ETFs traded globally and for good reason.
ETF’s are quickly gaining in popularity as an investing strategy and arguably considered one of if not THE best stock trading system as they have a number of advantages over other investments instruments, such as hedge funds. First, they are very flexible in design. For instance, whereas other funds are priced only once per day, ETFs can be bought and sold in the same way as stocks and shares i.e. intraday trading. In addition, leverage is usually provided to help purchase ETFs.
As a successful trader in forex and trend trading, investors who utilize stock trading techniques disciplined by ETF trading rules tend to maximize profits at minimum risk. Trend trading strategies mitigate risk by signaling the best entry and exit points into and out of new buying or selling channels.
In addition, a trend following trading system can help you bypass many problems that often plague beginning traders who:
As a successful trader in forex and trend trading, investors who utilize stock trading techniques disciplined by ETF trading rules tend to maximize profits at minimum risk. Trend trading strategies mitigate risk by signaling the best entry and exit points into and out of new buying or selling channels.
In addition, a trend following trading system can help you bypass many problems that often plague beginning traders who:
1. Expect to realize profits from every ETF trade and do not know or have even a simple ETF trading system with both positive win:loss and risk:reward ratios.
2. Have little to no money management discipline and trade.
3. Lack a robust or disciplined psychology to deal properly with the ETF market. They let their emotions influence their trading system or strategy…(if any) and as a result invest money that they can ill-afford to lose.
4. Do not practically understand the concept of leverage and consequently risk too much of their account on single trades.
5. Use a stock market trading system that's akin to a celebrity gambling in Vegas. Instead of taking it very seriously and trade in a business-like fashion they attempt to make big profits by taking unsubstantiated risks.
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2. Have little to no money management discipline and trade.
3. Lack a robust or disciplined psychology to deal properly with the ETF market. They let their emotions influence their trading system or strategy…(if any) and as a result invest money that they can ill-afford to lose.
4. Do not practically understand the concept of leverage and consequently risk too much of their account on single trades.
5. Use a stock market trading system that's akin to a celebrity gambling in Vegas. Instead of taking it very seriously and trade in a business-like fashion they attempt to make big profits by taking unsubstantiated risks.
The bottom line is that when trading trends you must have a systematic discipline to overcome these problems by deploying a methodology that will allow you to trade with a low risk trading configuration.
The main aim of your strategy is to identify trends, as early as possible, in order to maximize profits and at the same time, avoiding fakeouts and false blips.
An ETF trading strategy, configured to low risk, usually has the following settings:
A minimum ETF lot will be traded and only 1% of your total margin will be traded with only one ETF trade will be active at any one time.
You may think that using such a small percentage of your balance would have only a minimum growth effect on your account. However, because of profit compounding you will be producing significant profits at minimum risk.
Understand that there is big difference between risking 1% and 10% of your total account per trade. Ten trades, risking only 1% of the balance per trade, would lose only 10% of the total account if ALL were to lose. Under the same conditions, 10% risked would result in losses exceeding 60%.
Clearly, the former case offers much more account protection resulting in an improved length of survival. You must appreciate quickly that the best stock trading systems will first teach skillful survivors and second -- big earners.
The main aim of your strategy is to identify trends, as early as possible, in order to maximize profits and at the same time, avoiding fakeouts and false blips.
An ETF trading strategy, configured to low risk, usually has the following settings:
A minimum ETF lot will be traded and only 1% of your total margin will be traded with only one ETF trade will be active at any one time.
You may think that using such a small percentage of your balance would have only a minimum growth effect on your account. However, because of profit compounding you will be producing significant profits at minimum risk.
Understand that there is big difference between risking 1% and 10% of your total account per trade. Ten trades, risking only 1% of the balance per trade, would lose only 10% of the total account if ALL were to lose. Under the same conditions, 10% risked would result in losses exceeding 60%.
Clearly, the former case offers much more account protection resulting in an improved length of survival. You must appreciate quickly that the best stock trading systems will first teach skillful survivors and second -- big earners.
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