My ETF Trading

part 2

Description of my best ETF trading system

When I am looking for possible opportunity for my ETF Trading strategy I use top down type analysis.

First I check and analyze current situation in broad based indexes and them I move into sector analysis to find possible ETF 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 ETF -Ultra short ETFs like DXD, SDS ..

One group is defined as technology based stocks. These ETFs use Nasdaq Composite as reference market for relative strength analysis. This group consists of these symbols: XBI,IBB, BDH,SWH,SMH, FDN

Second group are stocks representing sectors or industries related more to "classical" economy. S&P500 stock market index is used as 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 underlying index or NAV value for these ETFs. It means that I chart $HDN instead of FDN. It provide better looking (cleaner) charts.

• define main market index trading trend
• find etfs which are presenting more relative strength then strongest market index . Such ETF is then picked for possible long ETF trade setup
• find ETF stocks which are relative weak to weaker market index. And such ETF is then picked for possible short ETF trade.

Next part will describe using remaining ETF groups

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