A Web Article: Etf Trading – Fundamental Or Technical Anaylsis? -411

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ETF Trading - Fundamental or Technical Anaylsis?

HWhat is the difference between technical and fundamental analysis in ETF trading?

ETF (exchange traded fund) fundamental analysis tries to predict future prices based on supply, demand, interest rates, government policy, weather, underlying economic factors and a whole host of other criteria. It does tend to work, in part, if you are an economist and become extremely good at it. It will, however, never generate the types of returns you can achieve with technical analysis.

Technical analysis, on the other hand, takes advantage of the fact that ETFs move in trends 30% of the time. Technical analysis identifies these trends so you can take advantage of moving prices. In technical analysis, it doesn’t matter what the reasons are behind price movement. Rather, it is the fact that prices are moving that is significant. Being able to identify trends in price movement is what you want to learn.

It is helpful if you can develop a system to be able to spot and predict these trends. If you do not have a current system that is time proven and successful, you can acquire this knowledge using an existing system.

Technical analysis assumes that prices reflect fundamentals already. For example,  let’s say that a hurricane is approaching the U.S. Gulf coast.  Oil prices start to go up. Because of this new fundamental knowledge, the price already started moving up at the time the knowledge became available, not when the storm actually hit. So, you might be able to predict that the price will be affected, just not exactly when or by how much or in what pattern.

It’s the same with any ETF. Assuming you can actually know everything there was to know that affected the price of an ETF, you could not possibly know when, by how much or in what variable pattern it would affect the movement of the price, which is the market’s reaction to that information.

Let’s say that somehow you had advance knowledge of all the fundamental information to be able to predict the eventual market crash in September and October 2008, you still would not know exactly when the crash would occur or how much it would crash. But with the right knowledge of technical analysis, you could have and would have been able to profit from the crash, regardless of its severity or pattern. Having a proven system can do that for you.

If your portfolio is stagnant or dropping, you may want to rethink your whole approach to the markets or at least diversify a portion to self trading. The beauty is you can gain the necessary knowledge and use a proven system that takes only 5-10 minutes every night, after the market closes.

The other thing is that, by learning and executing a proven ETF trading system, you can achieve returns of 3% a month within an IRA or 6% a month outside an IRA. All this while risking only 1% on every first trade and having very low draw downs.

If you’re into day trading, you can magnify these returns even more.

In summary, fundamental analysis examines the reasons behind price movements and attempts to predict prices based on these reasons. Technical analysis is only concerned about the fact that there are movements in prices and attempts to predict those movements, whether they are up or down. It’s in the movement of prices where profits are made. Find the best ETF trading system and you can start building significant wealth.

Watch the video related to etfs

Due to how leveraged and inverse ETFs are compounded, volatility can lead to wildly unexpected results at these funds, explains Morningstar ETF analyst Bradley Kay.

Help answer questions about etfs

What is the downside to investing in ETFs?
I've been researching ETFs for several weeks now (amex.com, marketwatch.com, etc), and the only major downside (aside from the tracked index going flat or south) I can find is the Expense Ratio eating into my profits. My understanding of the Expense Ratio is that if it's 0.50 then "they" take out $50 for every $10k you have invested in the ETF. Is the $50 taken out annually, quarterly, or whenever the ETF is rebalanced? Are there any other expenses involved with ETFs?
When compared to buying a stock, which charge per trade, buying an ETF seems like you get charged for the trade plus get charged on the expense ratio. But when compared to a mutual fund, you don't get charged per trade per se, but the mutual fund's expense ratio tends to be higher than an ETF due to ETF being less actively managed. Am I correct?
http://www.etf-trades.com is your gateway to a proven succesful ETF trading system.

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19 Responses to “A Web Article: Etf Trading – Fundamental Or Technical Anaylsis? -411”

  1. cboyke Says:

    If holding Ultra and UltraShort ETFs over time is a guaranteed losing strategy, then, by definition, selling them short should be a guaranteed winner. A simple approach would be to sell short equal dollar amounts of both the Ultra and the UltraShort ETF, and hold your short positions open for a long period of time. You would make money regardless of market direction.

  2. The Fex Sausage [Redux] Says:

    If you want to short the market, then you need to sell individual stocks or widely traded ETFs like DIA or SPY short. Bear ETFs don't actually work the way they are described. Due to technical difficulties in the structure of the ETFs they don't always exactly mirror the market that are supposed to. In the big market drop a year ago, many bear funds experienced liquidity problems and the price of the ETF went down even though the underlying index was going down. This meant that people who predicted that the market was going down lost a lot of money even though they were right.

    Moral of the story: if you want to go short, then go short; don't look for gimmicks.

  3. Jacobin777 Says:

    I do agree with its not a completely practical example, but I think it does do a good enough of a job for at least someone willing to risk money on these ETF’s to look into them much further…..and I think that was the basic goal of the video.

  4. Festina lente Says:

    You can short the TLT if you want to bet long term interest rates will go up.

    Alternatively, you can buy TBT. That is you take a long position on TBT to get the desired effect. TBT is double-short long bond ETF. That is, the return you get on this ETF is the same as that of taking a leveraged short position on long-term bonds.

  5. humby Says:

    Yes, that is part of it. Corrolation to the spot price depends on the combination of trade in the futures, options, or stock of companies in or related to the commodity. Also depends on whether it is a ETF or an ETN. The UNG is an ETN and it is being discontinued within the next couple days because it has preformed poorly.

  6. Charles1667 Says:

    I use Scottrade and have been very satisfied. They have a good trading platform and customer service. They are cheaper than Etrade.

    I'm not familiar with Zecco, other than looking at their website. But based on your question, you won't need much in the way of service. They could be a no cost way to trade ETFs. I have noticed a number of questions about them which can indicate a customer service problem. Look their site over and see what you think.

  7. mukwonago53149 Says:

    etfconnect.com lists all by family. best resource available.

  8. hispeed007 Says:

    Nice job. Key is “daily” performance.

  9. mombooga Says:

    This is not a practical example. Even tho it explains the math and how these lev etfs work, the market rarely goes up one day, down the next, up the next, down the next and so forth. If the market goes in your direction two days in a row then the profits add up. However, it is definitely a very short term as volatility is not good in this case..

  10. ETFresearcher Says:

    Another consideration is that ETF's can be bought/sold like stocks. There is no "holding period" as required by many mutual funds that you purchase through a brokerage account or direct from the mutual fund company. So if the ETF sector is heading down (eg. real estate VNQ), you can get out by simply selling your shares.

  11. ferl k Says:

    It depends.

    If you plan to make a one time deposit, ETFs.
    If you're making monthly deposits, funds.

    If you're somewhere in between, it depends on the commission you'd pay to your broker to buy the ETF.

    One warning, not all brokers let you buy ALL funds for free. Check with your broker first.

  12. russrimm Says:

    I don't believe Fidelity operates any ETFs. You can buy and sell ETFs through your Fidelity brokerage/retirement account. iShares is one of the biggest ETF providers.

    QQQQ looks very interesting and has returns near or better than Contrafund (FCNTX). FCNTX seems to perform better in bear markets, QQQQ a slight bit better in neutral and bull markets.

  13. i4Truth Says:

    Outstanding video! In spite of all the garbage on youtube, there are some real hidden gems like this. Five big ones…..

  14. hoodhoprox Says:

    History establishes a trend and gives cues as to how the market HAD dealt with the company in regard to things that went on. It does not directly bear on the future any more than if the previous coin toss were heads. As in the coin, there is still a 50-50 chance on either heads or tails (although I have had a few land on edge, they eventually fell one way or the other). What the market DID (past tense) does not require the market to do it again.

    Still, check for major events and trends. Does your stock tend to go up when the Dow goes up? Or may be it goes the other way (as in folks would rather buy a popular blue chip than buy this company when they are in a buying mood)? Or is there any common correlation (often not)? Is your stock seasonal? My first purchases were for an air conditioning manufacturer, so I bought when it was cheap, Winter, and sold when it was higher, early to mid-Summer. If your company, say, made hot chocolate, it would have a different season than it it, say, sold snow cones. Has your company done a lot of ups and downs but within a fairly steady corridor? Then there are reasons why the market may have established a ceiling and a floor, so ferret out some ideas for those price supports or resistance. Similarly, if you can discern other characteristics that frequently happen, you've just been handed an opportunity to improve your odds–if your coin tosses have never gone more than one side four times in a row, for instance, I would bet for the other side, even if the actual odds for that specific toss were still only 50-50. If your stock tends to peak in January, April, and August, then look at your calendar and time your purchases, or sales, with that in mind, even if you haven't figured out the common causes. History, therefore, gives hints and clues. The market, however, doesn't have to bow to history. In that you are on your own.

    Still, there is another important history. It involves comparative advantages. Does your company tend to make more profits than its peers? Does your company tend to make more profits more consistently than its peers? Does your company look like it will continue to perform this way? (If not, then look more closely at its peers) Profitability tends to win out over hope and hype in the long run, so look at its history of doing business, and let the market do whatever it wants.

    The first is trading. The latter is investing. What are you really wanting to do?

  15. mombooga Says:

    Explain both up side and down side to be fair then let people evaluate their own risk.

  16. Camryn Says:

    Fundamental analysing two.

  17. g.kosmala Says:

    If a trend is reaching some point where the market has proven to be unrelenting, the trend may bounce back and reverse trend for some time.

  18. Sullivan Stevenson Says:

    I actually made back my subs paid in under three months! And expect returns of over a hundred percent in a year.

  19. Michael Says:

    Peter has a tested, proved, written trading plan that he follows every time he enters a trade, Paul doesn't. ‘The trend is still down on the monthly chart as can clearly be seen, so that is the way That I need to be positioned with a lot of my portfolio. ‘Again, I have drawn a swing chart over the price bars on this daily chart. It was time for Paul to go.

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