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Thursday, December 3, 2009

Have A Couple Of Good ETF Trading Strategies

By Patrick Deaton

It never hurts to have a couple of good ETF trading strategies if you are contemplating getting into trading in an exchange traded fund. These index funds or trusts can be excellent investment vehicles because they carry broad ranges of securities that offer many opportunities for trading. Having a good plan and a strategy for trading can go a long way towards increasing chances of income return.

At its heart, an exchange traded fund most closely resembles a mutual fund in how it is set up and then operated. ETFs also behave similar to the ways in which stocks behave in that they can be traded and bought and sold, or at least the securities in the baskets can be traded and bought and sold. Also, each ETF tracks a particular market index such as the Standard & Poor's.

Small investors aren't generally allowed to participate directly as an authorized participate in an exchange traded fund. Usually, large institutional investors and the very rich are the only ones allowed direct access. However, small investors can get into ETF fund trading by going through an online exchange traded fund trading system. There are several good ones on the Internet.

It is strongly recommended that anyone who is considering investing some starting capital in a trading system learn at least one or two good strategies for trading before going full bore in a trading system. There are usually two categories of strategy out there; those are fundamental in nature and those that are technical in nature. Many people are attracted to technical strategies.

Probably one of the best of the technical trading strategies around and that is a good strategy for those looking for a strategy that can highlight the best time to buy a security is what is called the "cup-with-a-handle." It is also what is known as a breakup pattern, and most technical strategies are designed to look at particular patterns, by the way.

The general strategy with this particular breakup pattern is to buy the stock or the security as the price begins to break upward on larger-than-average volumes of trading. Losses are cut if it begins to drop back to the level just before it began to break upwards (known as the pre-breakup level). There are a series of rising stop levels if the pattern goes up as predicted.

With it, the potential for capturing most of the upward move is extremely likely. One should take care to be wary of strategies that recommend going opposite of the pattern exhibited by the cup-with-a-handle, as most analysts say that such a strategy doesn't tend to work nearly as well. Look at the pattern in the stock chart and you'll be able to pick out the dip, the climb and the handle.

Before beginning to play around in any ETF trading, it's an excellent idea to make sure you take the time to learn a couple of good ETF trading strategies before getting into serious trading. Keep in mind that, while income potential is excellent if a good plan is carried out, there is always the likelihood of loss of trading money on the markets. - 23208

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