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Technical Or Fundamental Analysis For ETF?, first let me share what these two types of analysis are.
Quick Link For Busy People >> Free ETF Course
Fundamentals, or as I like to call them fuzzymentals, try to predict ETF future prices by supply, demand, interest rates, government policy, weather, underlying economic factors, etc. In part it does work if you are an economist and very, very good at it, but it will never generate the types of profits that technical analysis can.
Technical analysis takes advantage of the fact that ETFs move in trends 30% of the time. It helps identify those trends and take advantage of moving prices.
Ultimately we don’t care what (if any) the fundamental reasons are for price movement, but that it is moving and we are capturing profit from it. Identifying trends is one of the most important things to learn. My system teaches you how to do this.
My system uses only technical trading because I know, not just believe, that the price already reflects all the known fundamentals. For example when a hurricane is approaching the U.S. Gulf coast oil prices start to go up. Because of the new fundamental knowledge of the storm the price already started moving up at the time the knowledge became available, not when the storm actually hit.
Most importantly even if somehow you magically knew all the fundamental information there was you would not know the market’s reaction to that information. If you knew all the reasons why the market was going to crash in September and October 2008 you still would not know how far it was going to crash. With technical analysis my system caught a very large part of that drop in many ETFs.
If your portfolio is stagnant or dropping it is time to rethink your whole approach to the markets or at least diversify a portion to self trading.
One of the questions I get a lot is how much money does the 5-10 minute per night trading system make? The answer depends on how much money you trade. The easier way is to look at percentages.
Total non compounded monthly result are: 6.43%.
All this while risking only 1% on every first trade and having very low draw downs.These results are with using margin, but that does not increase risk because we still risk only 1% regardless of using margin or not.
Day trading my system can make you over 12% per month with the same low risk. You could make more once you become experienced study the larger list of ETFs.
If you use an IRA account I will give you a list on inverse ETFs which allow you to sell the market, but because you can’t use margin in a IRA or 401k account you will need to cut the above returns in half. Plus cut the draw downs (losses) in half.
Where else can you safely average 6% per month or 3% per month in a IRA account trading only 10 minutes per night? Anyone who complains about this does not understand real trading and investing or has gotten sucked into the hype on the internet.
Read more great trading insights, along with free videos at Free ETF Course
One of the most popular technical analysis indicators is the simple moving average also known as SMA, if you learn how to use these correctly they can be a very useful tool to help you to make good trading decisions.
The 50 simple moving average, or 50 SMA, is simply the sum of the last 50 values for each period, divided by 50, this is a moving window, as time moves on so does the average. Notice that I used the word period because this indicator works on any time period in exactly the same way.
It can be used on monthly, weekly, daily, hourly, 30 minutes, 15 minute and on whatever time period you want to monitor and trade. Although the SMA is the most widley used there is also the exponential moving average or EMA. This is a weighted version of the formula using the mathematical exponent function to give more weight to the more recent values, this has the effect of making it a much faster average that many traders like.
The reality is that it probably does not matter if you used the SMA or the EMA, what does matter however is that you use one or the other and then be very consistent with it. Do not switch between them, it is more important that you trust your chosen indicator then a slight difference in its value.
The SMA is oftern used to determine what the trend of the stock is, depending on the value used it could be a short term, medium term or long term trend. An important point to note is that moving averages are most useful when the stock is trending, if the moving average is flat, i.e. horizontal on your chart it can become very choppy, this is a good time to not trade.
The general rule is that if the current price is above the SMA the trend is up, if below the trend is down. This is very important to know because it forms the basics of trend trading and trading with the trend.
For the short term trend many traders like using a 5-8 SMA or EMA, here is a trading secret, never trade again the direction of the short term tend, this is really just common sense when you think about it.
Moving averages can often act as support or resistance, many traders use the 15, 21 or 30 SMA for this purpose.
There are a number of other very important moving averages that you need to know about, these are the 50, 100 and 200 SMA, and this mostly applies to the daily and weekly charts. A lot of big players in the markets, the mutual funds, investment banks etc use the 50 and 200 SMA as support and resistance, if they decide to buy or sell based on these you need to follow suite, the 100 to a lesser extent. These are very useful averages to watch if you trade ETF’s like an Oil ETF.
A useful tip is that when a stock breaks through one moving average it will often move all the way to the next, for example, if a stock breaks the 30 it may move to the 50 before finding some support or resistance
