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Monday, December 14, 2009

Finding The ETF Trading System That Works For You

By Patrick Deaton

When you are comparing the qualities and effectiveness of an ETF trading system you will want to take a critical look at several factors. Will the system be effective in the sector that you are trading in. Does it have consistent gains for its users. These and many other variables will play into whether a system is going to work for you.

Some traders starting out do not use a system or strategy. This is a costly way to learn ETF trading, but it is done. Using a system, especially when you are learning ETF is a great way to learn the intricacies of trading and what to look for when comparing different opportunities.

The most popular system used by new trader is a moving average system. This system incorporate a trend following strategy that can follow trends that cover a short period of time to a longer historical trend analysis. When using the moving average system with the complementary strategy a person can see significant gains in the vectors that the system is designed for.

When looking at systems it is important that you look at their history and origin. You will find that the origin of a system will provide the details that will help you in utilizing and optimizing the system, strategy, and vectors for which it has been designed. The system category will be clearly stated and in most cases you will find detailed information about the types of vectors that will show the best gains for your investment using this ETF trading system.

When using any system you will want to learn what the system category, or strategy is. Many systems use either trend following or oscillating strategies. An oscillating strategy is used for riskier sectors that have increases and drops in their market without any apparent trend or warning. Many people who use this strategy are trading in sectors that can make a significant reversal without any apparent reason.

Using an ETF trading system that will provide an opportunity to hone the skills needed to trade effectively in riskier vectors will allow a person to move smoothly through the learning curve and be prepared. When a trader is aware of the nuances to look for in a vector and its history, they are better able to take advantage of movement in the market that a less trained eye would not see.

Blending strategies and systems on paper for different vectors will give you the information you need to effectively trade. You will be able to see how certain systems and strategies work together with particular vectors. You can also learn which trends and patterns are significant for specific vectors.

When a system lists the sectors it will be most effective in the trader will be less able to utilize the system in a high risk vector. If the system and strategy have been designed for an oscillating vector it will have less analytical information regarding the sector and trends of the sector. However, there may be more information provided about the major companies in the sector that create the significant and unexpected rise and fall in their sector.

When starting, one safety net will be diversification of ETFs. By learning systems on the lower risk ETFs you will have an opportunity to develop the skills that are needed to be successful with the more high risk systems and trading sectors.

Discussing different systems and strategies with long time traders and professionals will be an invaluable resource. By learning about how the systems and strategies are inter-related and their effectiveness in certain sectors, you will be able to find the system that will be most effective. Making a commitment to a system and following the rules of the system will also be more effective for long term gains. - 23208

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