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Wednesday, December 23, 2009

Effective ETF Trading System Hints For Beginners

By Patrick Deaton

Your personal style, goals, and skills are going to help you to find the ETF trading system that will be best for you. The system that works for one person will not work for everyone. That is why you will find hundreds of strategies, methods, and systems on the Internet. During the learning curve you will have the opportunity to try on different strategies and systems and find the one that is most effective for you and fits you best. That will be the most effective ETF trading system.

The challenge of finding the best trading system is in researching and learning how to identify systems that are worth trying. There are many websites that offer training and books about an effective system that will work. However, in reality the best websites will offer training, books, information, forums, and chat groups on all the strategies, methods, and systems. You will be able to learn from successful traders who have already tried various systems and can tell you why they were not effective.

When a person is just starting to participate in ETF trading they will be starting out slow. The first couple of years spent in ETF training are the learning curve that most successful traders say is average. This will be an opportunity to make a plan on how to try on different strategies and systems without committing a major amount of resources to any particular one.

The safety net will help you to stay afloat in a very fast moving trading medium. The ETF is moving at 15 second intervals. If a person has committed to the wrong system, in the wrong sector, they can lose gains before they have finished their first cup of coffee. So, setting a stop-loss will help you to avoid those kinds of losses.

Another helpful net when beginning will be to set buy and sell points or set take profit prices. This will be a huge help until you have got a good knowledge base of how ETF trading works. Once you know how to do the technical and historical analysis that makes any system and strategy you use work more effectively, you will be able to have less structure in your safety net. But until you feel very comfortable with ETF trading, the stronger your safety net is, the more consistent your gains will be.

It may take some digging, but if you look you will find that each of the ETF trading systems has a breakdown that provides information about their risk, how hard they are to use, the parameters to set, and other information that will help to analyze that system. The ratings may be low risk (I haven't seen any), medium low to medium, high risk, and well there are systems beyond high risk, I just don't go there.

When looking at systems, any system that involves following trends is a system worth looking at. Learning to follow and spot trends, patterns, and variables is a great way to gain confidence in ETF trading. A system like the ETFA is one good way to start. The Exponential Moving Average System is a medium low to medium risk system that involves following trends. It is used primarily with TLT, XLE, RTH, XLF, and SPY (long term). Most people run the system on a fifteen day cycle. When the fast EMA and slow EMA cross, you move.

It is always good to start tracking a system before trading using the system. In this way you can see how effective it is on a consistent basis. When trading, there will be many opportunities for gain that come around, the system that connects you to those gains on the most consistent basis will be the correct system for you. - 23208

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