Trading Exchange Traded Funds
The same skills of technical analysis that serve a stock trader are effective for trading exchange traded funds, ETFs. These investment vehicles track the composition of various collections of stocks. For example, an exchange traded fund may track the S&P 500 or the Russell 3000. Trading exchange traded funds is also possible with funds that track various market sectors such as bio tech or oil. The fundamentals that drive the US economy will commonly take the price of a widely based ETF up and down. Market sentiment drives daily price fluctuations. As such statistically based tools that predict market movement based on price patterns can be profitable. Profitable day trading strategies that work for any market commonly work for trading exchange traded funds.
Trends in Trading Exchange Traded Funds
Trend following in day trading is a proven means of making a profit in the markets. The rationale behind following a trend is that for short time spans what has been going up tend to continue and likewise what it falling does as well. A trader buys into a trend and exits after gaining a reasonable a profit and before a price reversal. Traders use technical analysis tools such as Japanese candlesticks in order to ascertain if price reversal is likely. When trading trends in ETFs traders set their sell stops loosely enough not to be caught out of the market before the next big move. They also follow a strict strategic approach and avoid falling prey to the greed and fear that so often stalk the markets.
Why Exchange Traded Funds?
Exchange traded funds such as those that track the S&P 500 trade at high volume and liquidity. As such they make technical trading predictions more accurate and thus they make technical trading more profitable. Those adept at the use of technical analysis in trading stocks may consider trading exchange traded funds as an alternative to single stock trading.
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