ETF Trading – 5 Steps to Create a Winning Long-Term Strategy

ETF Trading – How to Improve your Strategy

There is a scam out there and folks around the world are losing thousands of dollars. A few months ago I received a call from a good friend of mine. She was informing me of a free conference to be addressed by a ‘superstar’ trader in a local luxury hotel. I attended the conference. The ‘superstar’ trader started is speech by showing us a video of his fancy home, luxury cars, private jets, and women. After this, he talked briefly about his trading strategy and why we all need to access his strategies. At a fee. $30,000 per year. There was no Q&A session. These scams are all everywhere. YouTube them. In this article, I will offer you free advice on how to create your ETF Trading Strategy.

Step 1: Read

You don’t like reading and you want to be a professional trader? Okay, get another job. As a trader, reading is a must. Reading will open your mind to the mistakes and successes of other people. When I was starting out as a trader, I remember reading a book called Money Mavericks. The book was a personal reflection by the author who had struggled to start his own hedge fund, became successful, lost 20%, and decided to shut down the fund. Reading these books will help you identify the mistakes that other traders did so that you can avoid them in future.

Step 2: Identify ‘Assets’ to Trade

The next thing you need to do is to identify the key areas or assets you want to trade. Luckily, there are many tradable assets that you can trade. There are: currencies, commodities, equities, indices, ETFs, and bonds among others. In currencies, there are hundreds of currency pairs that you can decide to trade. In equities, there are thousands of companies that you can trade. The same with treasuries and ETFs. If you believe that you are destined to become an oil trader, you should then go ahead and research more about the oil market and come up with a strategy based on this. If on the other hand you want to trade equities, select an industry or companies that you want to trade.

Step 3: Technical and Fundamental Analysis Tools

To be successful as a trader, technical and fundamental analysis are very important tools for you to use. Fundamental analysis involves the use of news to allocate capital. On the other hand, technical analysis uses mathematical and historical data to determine what will happen in future. There are hundreds of technical tools that one can use. At this stage, you should test these tools and identify the best tools that you are comfortable with.

Step 4:  Create the Strategy and Backtest it

A demo account is a very important tool in this step. This is because it will give you a platform with live data which you can use to trade. Using the demo account, you should now create your trading system which can be manual or automatic. An automatic expert system is one where the system will initiate and end trades when certain criteria is reached. If you are new to trading, this process should take a few months before you move to a real account. You can also decide to trade using a manual system where you will integrate the technical indicators in the chart and then initiate a trade when your preferred criteria is met.

Step 4: Time to Trade

After you have created your own strategy and back-tested it, you should now go ahead and trade. Remember that risk management is another important aspect of trading. Risk management will enable you lose only funds that you are comfortable losing. Many traders risk a maximum of 10% per every trade. This enables them to only lose funds that they are comfortable with. You should do the same. This will enable you to grow your funds in a small but assured way.

ETF Trading – Useful Links

  • Find the ETF Trading definition on Wikipedia
  • Discover how to Trade ETF on Etf
  • Read the Definition of ETF Trading on Nasdaq