A Beginners Look At ETF Trend Trading
There will be a lot of different types of trading discussed when a person enters ETF. One of the often discussed types of trading is ETF Trend Trading. If you have taken a course or read about ETF trading, you already know that to be successful you need to do a technical analysis of a sector. This and other historical information helps you to spot patterns and trends in the sector in which you are trading.
Trend trading is doing technical analysis on sectors to identify trends then hopping in when a trend begins and getting out when the trend shifts. Sound familiar? If you are doing the homework to be successful, you are already basing trades on trending. This is not a secret method of trading that will require more effort than one currently puts in if they are doing technical analysis and historical data collection prior to trading. It is more focused on the analytical indicators, but is not different.
There are different types of trends that a technical analysis can be used for. When a person does a three to five year analysis on a section they are focusing more on the short term. Short term indicators may show the changing trends, but those trends may be more affected by other variables in the current market and may have some false indicators that will not be helpful in reaching the kind of gains that a person is working towards.
If a person enjoys doing analytical studies on sectors. Yes, some people do. It is easy to get bogged down in the analytics and indicators of sectors. To avoid this, it is good to set parameters for the amount of study and research one will do before taking advantage of some of the more obvious trends that are evident in a sector.
Short term trends are usually historical data for a sector covering one to three years. A technical analysis using historical data of one to three years is going to show only trends that occur in that time frame. When a person is going to use short term trends as their primary indicator, they will need to move very quickly in creating a long position when the trend rising or short when the trend is dropping and get out quickly when there is a blip on the screen. Employing only short term trending may prevent a person from seeing trends that occur within a longer time period.
Intermediate term trends are the trends that occur within a long term trend. When analyzing trends, if the reason for an intermediate trend can be effectively identified, and a pattern found, there is a significant opportunity to make gains on those blips that occur in the sector.
When traders act on trends without having the background to know when to get in and when to get out, they can suffer losses. However, a person can use an intermediate trend in a sector to their advantage if they know that the same patter occurs every four years and what the buy and sell limits for that trend should be.
When a person has a long term ETF, they are most interested in long-term trends. A sector that is in a rising trend for ten years, then reverses course rapidly can catch a person unaware if they have not done the technical analysis to prepare for that reverse.
Article Source: FxTradingStock.com
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Learn how it's very possible to make 6% per month in your investment accounts using etf trend trading! "Big A" is a recognized expert in the world of etf trend trading system and reveals etf secrets that have been kept under wraps by hedge traders for years. Give him your email and get a free report and webinar today!
by: Patrick Deaton
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Word Count: 580
Date: Mon, 4 Jan 2010
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