My ETF Trading part 2
Description of my best ETF trading system
When I am looking for possible opportunities for my ETF trading strategies I use top-down-type analysis. First, I check and analyze the current situation in broad-based indexes and then I move into sector analysis to find possible trading setups. Broad indexes are represented in my
stock analysis software
by these types of symbols:
- market indexes (like Dow Jones Industrial - $INDU,S&P500 -$SPX, Nasdaq Composite - $Compq)
- market ETFs (DIA, SPY, ONEQ, QQQQ....)
- for trading short side I use also Inverse market funds -
Ultra short
and
leveraged funds
like DXD, SDS ..
All sector-based ETF stocks are divided into two groups for my stock chart analysis One group is defined as technology-based stocks. These ETFs use NASDAQ Composite as a reference market for relative strength analysis. This group could consists of these symbols: XBI, IBB, BDH, SWH, SMH, FDN Second group is stocks representing sectors or industries related more to the “classical” economy. The S&P500 stock market index is used as a base market for relative strength analysis. This groups contains: XLB, XLE, XLF, PPH, RTH, TTH, WMH, IYR, IYT, XLP, XLI, XLU, XLY, XHB I chart the underlying index or NAV value for these ETFs. It means that I chart $HDN instead of FDN. It provides better-looking (cleaner) charts.


My trading strategy for these exchange traded funds is based on this simple logic:
- define main
market index trading trend
- find exchange traded funds that show more
relative strength
than the strongest market index.
- find funds stocks that are relatively weak to a weaker market index. This fund is then picked for a possible
short trade
with exchange traded funds.
The
next part
will describe using remaining
ETF groups.
Return from My ETF strategy - part 2 back to ETF Trading
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