ETF Trading Strategies & Tips, ETFs Investing Blogs

Tuesday, March 31, 2009

Different Types of Sector ETFs

One can classify sector Exchange Traded Funds (ETFs) into different categories based on its construction and its management. Below are different types of sector ETFs.

Market Weight Sector ETFs – are sector ETFs which are constructed based on market capitalization for the sector/industry/index it is tracking. These sector ETFs tend to biased towards large-cap stocks (and poorly tack small cap stocks) as in most sectors most of the market is capitalized by a handful of big companies. Advantages include high liquidity, less downside risk and good overall market exposure.

Monday, March 30, 2009

Stock Market Weekly Update, 30 March 2009

The Week Ahead: A third straight week of market gains was propelled by some positive economic numbers as the three major indices have already gained as much as 25% from the early March lows. The Case Shiller Home Price Index and consumer confidence numbers will be important numbers to watch on Monday. The ISM Manufacturing report along with construction spending and pending home sales are due by Tuesday. Watch the jobless numbers and factory orders on Thursday but especially the employment report on Friday. In another development, the G-20 Financial Summit in London starting Friday will pre-stage next week's market open.

Friday, March 27, 2009

Short Hedge or Selling Hedge

Short hedge, also known as selling hedge, is a hedging practice mainly practiced by institutional traders, hedge funds and commodity producers to hedge against future price volatilities. In short hedge, the trader shorts a financial instrument (mostly futures and options). Selling hedge is mainly practiced for agricultural commodities but can also be practiced for other financial instruments like stocks and fixed income securities.

Thursday, March 26, 2009

Bearish Belt Hold Candlestick

Bearish belt hold is a trend-reversal candlestick pattern indicating the beginning of a new downtrend after a significant uptrend. It is a single candlestick pattern formed of a long black (colored or bearish) candlestick, which is an opening marubozo (have no upper shadow). Bearish belt hold candlestick occurs frequently and is considered less reliable and thus confirmation of trend change is necessary.

Wednesday, March 25, 2009

ADR – Types and Advantages

American Depository Receipt is a depository receipt representing one or more shares of a foreign company that is traded publicly in U.S. markets. There are many two types of ADR, as unsponsored and sponsored ADR.

Tuesday, March 24, 2009

Herrick Payoff Index or HPI indicator

Herrick Payoff Index (HPI) indicator is an indicator for futures and options traders which can be used to confirm trends and to predict trend changes. The indicator was developed by John Herrick, and was limited early to only some traders; in early 1980s it became more popular among traders. HPI is a complex indicator and this necessitates the use of a computer. The formula is

HPI (K) = Ky + [(M – My) x C x V] x [1 + (2 x I/G)]

Monday, March 23, 2009

Disadvantages of Trading ETFs

Exchange Traded Funds (ETFs) have many advantages over other financial instruments. But they also have some disadvantages. The effect of these disadvantages on a trader’s portfolio can differ with trading goal, risk capital involved, portfolio diversification, trading style, market knowledge, ETF type, tracking index/sector, etc. Below are some major disadvantages of trading ETFs.

Friday, March 20, 2009

What are Depository Receipts or DRs?

Depository Receipts or DRs are negotiable securities traded on US and European stock exchanges but represents a foreign company’s publicly traded shares. In short, a depository receipt represents one of more share of a foreign company traded outside the country. DRs are traded just like stocks and DR holders have same privileges as a local shareholder (voting rights and dividends). The most common examples of DRs are American Depository Receipt (ADR) and Global Depository Receipt (GDR).

Thursday, March 19, 2009

Bearish Mat Hold Candlestick Formation

Bearish Mat Hold is a bearish trend continuation candlestick pattern indicating continuation of prevailing downtrend even after a temporary halt in the trend (bullish days). It is one of the highly reliable candlestick formations which is rare and is often difficult to identify because of its strong resemblance to Falling Three Methods pattern. Both are five candlestick patterns; the major difference is in middle day candlesticks which are lower (in mat hold) than the counterparts of falling three methods.

Wednesday, March 18, 2009

BB&K Model and Types of Investors

Many have tried to categorize individual and institutional investors to different categories based on their investment goals, risks, position sizing and more. One of the most successful classification system is the Bailard, Biehl and Kaiser or BB&K model which categorize individual investors to 5 categories.

Tuesday, March 17, 2009

Major ETF Trading Strategies

Exchange Traded Funds (ETFs) are flexible instruments to fulfill various portfolio goals. Different traders employ different strategies to profit from ETFs. Below are some most followed ETF trading strategies.

Buy and Hold Strategy: This is so far the most followed ETF trading strategy; for profiting from broad indexes or sectors, and also for limiting overall portfolio risk. Diversity of ETF funds is the core of this strategy. Traders can choose fixed incomes or steady portfolio growth and can profit from growth of almost all financial products – stocks, bonds, funds, commodities, indexes, emerging markets, currencies, etc.

Monday, March 16, 2009

Stock Market Weekly Update, 16 March 2009

The Week Ahead: The overdue bounce in the stock markets is the best since November of last year with all 30 DOW stocks up for the week and ending a four week losing streak. Markets will try to gain further traction on Monday's industrial production report followed by Tuesday's Producer Price Index and housing starts. Wednesday will end a two day Federal Reserve meeting on interest rate policy and the release of the Consumer Price Index. Jobless claims and leading indicators are out on Thursday and Ben Bernanke will give a speech on Friday.

Friday, March 13, 2009

Adaptive Moving Average

Adaptive moving average (AMA) considered as one of the newer moving average tool for finding trend changes. AMA was developed to overcome the disadvantages of other moving averages (simple, exponential and weighted moving averages); especially their time lag in predicting the trends and the generation of false trading signals. Although there is not much evidence that adaptive moving average offer better results than others, it is a very good indicator when used in conjunction with other tools.

Thursday, March 12, 2009

Bullish Mat Hold Candlestick Formation

Bullish mat hold is a bullish trend-continuation candlestick pattern, which indicates continuation of an uptrend ever after some bearish days. This is a rare but highly reliable 5 candlestick pattern which has strong resemblance to bullish rising three methods pattern; and is thus often not easy to identify. The major difference is in the position of middle candlesticks; they are higher than their counterparts in rising three methods.

Wednesday, March 11, 2009

Tips for ETF Portfolio Allocation

Many experts believe that the most appropriate portfolio allocation is the corner-stone for a trader’s success. One of the major advantages of Exchange Traded Funds (ETFs) is their flexibility which make them good instruments to profit from any market condition or to limiting risks or to save trading time. Right way of ETF portfolio allocation can help investors to achieve various goals. Here are some tips.

Tuesday, March 10, 2009

Advantages and Disadvantages of Hedging

Like any other wealth-building practices, hedging involves both benefits and drawbacks. These benefits and pitfalls differ with trading style, investment preferences, market changes, other risk-minimizing practices and trading goals. In short, the benefits that one gets from hedging his risks can be not there for other trader.

Monday, March 9, 2009

Stock Market Weekly Update, 9 March 2009

The Week Ahead: As this week begins, unemployment is at a 25 year high of 8.1% while the DOW and S&P 500 are at 12 year lows. With this fresh on investors minds, evidence of a turnaround may be needed turn the tide of falling stock prices. Ben Bernanke will speak on Tuesday when wholesale inventories are released. Keep an eye on the jobless claims numbers on Thursday along with advanced retail sales and business inventories. Friday's trade balance and Import Price Index are important too.

Friday, March 6, 2009

Successfully Using Gann Indicators

Successful using of Gann tools for finding and exploiting trading opportunities require good timing, talent and knowledge. But ones you are an expert they can offer you above average profits and can offer significant market knowledge as Gann indicators cover past, present and future market on a single screen. The basic requirements of successful Gann set are,

Thursday, March 5, 2009

Falling or Declining Wedge Formation

Falling Wedge, also known as declining wedge, is the wedge formation which has a strong bullish bias. They can be trend continuation pattern, if preceded by an uptrend or can be trend reversal pattern, if preceded by a downtrend. Falling wedge formation occurs when prices increasingly tend to consolidate to a lower price levels. The formation helps long-term traders as it usually takes months to develop.

Wednesday, March 4, 2009

What is Ulcer Index or UI?

Ulcer index or UI is a popular indicator which shows the riskiness of an investment. The indicator was developed by Peter G. Martin and Byron B. McCann and was published in 1989 in the book “The Investors Guide to Fidelity Funds”. Ulcer index is mainly used by traders to measure short-term risk associated with an instrument; stock, index, funds or commodities.

Tuesday, March 3, 2009

Weekly Market Newsletter, 2 March 2009

The Week Ahead: The GDP slipped 6.2% last quarter. Taxpayers now own 36% of Citigroup with the government's $25 billion conversion of preferred stock to common. General Electric cut its dividend and consumer sentiment dropped again in February. An assortment of economic reports to contend with include personal income and construction spending on Monday, auto sales on Tuesday, factory orders on Thursday, and another worrisome unemployment report on Friday. Also, watch Ben Bernanke's testimony to Congress on Wednesday.

Monday, March 2, 2009

Hedging Against Trading Portfolio Risks

Hedging is one of the most commonly used financial words which denote any practice to reduce or remove future loss associated with an investment or instrument. Hedging is like insurance; actually insurance is also a hedge. Today one can hedge against almost all type of future losses including disasters, market volatility, robbery, inflation, interest rate changes, and more. Hedging do not stop these events from happening but enables a person to reduce the effect (loss) of the events.

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