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Thursday, December 24, 2009

Use ETF Trend Trading The Right Way

By Patrick Deaton

When it comes to exchange traded funds -- which are similar to mutual funds and how they operate -- there are different ways to make money in methods that they trade in. What to know about ETF trend trading, then, means that you'll learn how to work within an ETF trading system that does what is called "trend following."

There are some very effective ways to make use of ETF's to bring in a steady income stream, and trend trading seems to be one of the best of them. Plus, it takes far less time to go about engaging in trend trading than in many other ways of trading through exchange traded funds. The methods for actually trend trading or following aren't very complicated when it comes to following market trends.

Naturally, you'll have to use an exchange traded fund system and go by its rules for trend following. As long as you have some patience and discipline and know-how to come into and get out of all market, the chances of you making at least a 6% ROI on a regular basis are actually fairly good. So take a few minutes to understand what trend following actually means before using it.

Generally speaking, there are several good ETF investment strategies to use when trading involving trend following; most brokers will refer to them as fundamental strategies, sector strategies and blend strategies. With fundamental strategy investing using trend trading what you'll be looking for our trends in trading that occur over a long period of time within the ETF.

Both costs and taxes are very efficient in this sort of strategy, and the particular portfolios you'll be investing in aren't usually traded very often and also will provide a lot of exposure to the market while also delivering a steady stream of reliable income. These are mainly mid-low to medium as far as risk of trading in the ETF goes.

Those who wish to engage in trend trading following a sector strategy are looking for a way to actively follow the market trends very closely so that they can react very quickly to changes in those trends. They have portfolios that would be invested in within the ETF are considered to be active because they are traded and monitored on a constant basis.

People who are looking to engage in trading using a blend strategy are interested in the best methods for entering and exiting the fund. Most people subscribe to momentum-based strategies that will tell them where the best times are to do so. Probably, for those starting out and who wish to use trend trading, it might be in their interest to use a blended strategy.

The last strategy that can come in handy when it comes to trend trading is what experts call a blend. In it, you will follow a 200 day moving average in order to identify areas in the market that are active. You will set up to find signals that let you track the long-term trend upwards and make your money that way. Always remember to set stop loss orders to keep a cap on your losses. - 23208

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