ETF trading strategies
Day trading is among the best ETF trading strategies because this environment is characterized by high volatility. This means that you have the ability to buy and sell ETFs any time throughout the trading day.
- SPDR S&P 500 (SPY)
- Gold Miners ETF (GDX)
- ProShares VIX Short-Term Futures ETF
- ProShares Ultra VIX Short-Term Futures ETF (UVXY)
- iShares MSCI Emerging Markets ETF (EEM)
These are also among the 5 most actively traded ETFs in the US.
An ETF exchange traded funds can provide you with very lucrative short-term opportunities. However, the odds of making any money by gambling on day trading ETFs are very low. That’s the reason why you need to play the game by a few rules.
Now, before we go any further, we always recommend taking a piece of paper and a pen and note down the rules on how to trade ETFs.
Exist two kinds of ETFs trades: for retail investors or for advisors and institutions making small purchases.
If talking about trades for retail investors, here are few simple and efficient strategies
1. Dollar-Cost Averaging. This strategy is good for reducing the impact of volatility on large purchases of financial assets such as equities. Dollar-cost averaging is the technique of buying a certain fixed dollar amount of an asset on a regular schedule, regardless of the changing cost of the asset. Beginner investors are typically young people who have been in the workforce for a year or two and have a stable income from which they are able to save a little each month.
2. Asset Allocation. Asset allocation, which means allocating a portion of a portfolio to different asset categories such stocks, bonds, commodities and cash for the purposes of diversification, is a powerful investing tool.
3. Hedging. This strategy is good for beginners who may occasionally need to hedge or protect against downside risk in a substantial portfolio, perhaps one that has been acquired as the result of an inheritance.
4. Swing Trading. Swing trades are trades that seek to take advantage of sizeable swings in stocks or other instruments like currencies or commodities.
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