Swing Trading: How to do it Using ETFs – DTTW™

Exchange Traded Funds ( ETFs ) is regarded as one of the safest means of trading. This happens because of a act of reasons such as : liquidity, safety, and low commission government. Liquidity comes because of the huge number of participants in the ETF market while safety comes because of the diversification expression of ETFs ( often being compared to mutual funds). ETFs are viewed as long term investments but many swing traders are using these instruments to make money ( see here to know your trade style ). They besides have highly low expense ratios. To date, there are more than 1,600 ETFs which gives swing traders excellent opportunities to allocate their money.

› Day Trade ETFs : Complete Guide Traders have been practicing swing trade for years. Some of them have become very experience and successful in it while many of them have failed. Swing trading is a strategy where traders attempt to capture a profit from an ETF price move within a very short time frame. It is besides known as day trading. The chief idea behind it is to enter and move from a trade as soon as you have attained a profit. For this cause, while fundamental analysis is a good method to study the market, most swing traders depend on technical foul analysis to enter or leave trades. → Learn When to Enter and Exit While trading

Selecting a good ETF

As stated above, there are more than 1,600 ETFs one can chose from. Some of these ETFs include : government bonds, corporate bonds, stocks, and commodities among others. For swing traders, selecting the right ETF is the first most important thing you should know because of liquidity issues. For example, corporate bonds ETFs are less liquid than equity based stocks. In addition, some sectors of equities are more liquid than others. For example, technology based ETFs are more fluid than the material one. apart from liquid, it is important to look at the past performance of the ETF, because this will give you a good indication of what to expect. Some of the most common ETFs for sidereal day traders, among others, are :

  • United States Natural Gas Fund
  • Industrial Select Sector SPDR
  • S&P 500 VIX Short-Term Futures
  • ETN and SPDR S&P 500 ETF

Swing Trading the ETFs

A good exchange traded fund deal scheme involves identifying the most liquid categories and then narrowing the search to 4. We recommend using alone 4 ETFs on a casual basis because it is easier to analyse and follow up.

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In every trade sidereal day, some sectors will perform better than others. This is known as the relative strength whose finish is to find a dear exchange traded fund to buy and a weak ETF to short. On a day by day footing, We recommend that you list the above ETFs in a table and identify 2 best and 2 worst performing ones. To do this, use the percentage scale rather of the numbers. We recommend this to be done at 10 AM or during the premarket. After listing these ETFs, find the best and worst perform and shift your concenter towards this. now you have 4 ETFs which you will trade with during that day. This should take less than 2 minutes to do. After identifying the 2 impregnable and the 2 weak ETFs, you should go ahead and go long in the former 2 while shorting the latter .

Short and Long Example

The chart below shows a inadequate on the Energy sector ETF. swift_trading The chart above shows a one-minute of XLE ( department of energy ETF ) which is in a downward tendency. As seen in the chart, the ETF has just touched a new first gear and then rallied back to a fall trendline. In the graph, We sold when the price touched $ 0.02 below the new first gear ( consolidation low ). then, We placed a stop passing $ 0.02 above the modern high and a take profit which provides a profit of 1.6 times the risk. A good exemplar is when the risk is $ 0.17. here, you should place a target that gives a $ 0.27 profit. In this case, if the target is way much below the previous golf stroke humble, you should avoid the trade. If the target is above the swing low, you should expand the target at least 2 or 3 times the risk.

many traders are now appreciating the need and simplicity of trade using ETF. These funds play a very critical function in ensuring that traders avoid liquidity risk. They besides ensure maximum diversification for the trader. however, it does not remove the entire trading risk in the trades. In fact, many people have lost significant resources by investing in bad ETFs. consequently, it is significant to conduct some research when selecting the ETF vehicle to use. → 3 Steps to Effective Technical Analysis

Useful external resource to use ETF while Swing Trading

  • 3 swing trading strategies to profit – ETFTrends
  • Best ETFs for Traders and Speculators – Forbes
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