|I promised some people here that I would do one more blog on how I Swing Trade Leveraged|
ETF's. I will attempt here to explain exactly how I determine when to enter and exactly
when to exit the trades. I stick to these rules as if there were a heavy fine for breaking them.
There is little guessing and no hesitation in starting, adding to, and closing out a position.
I have attatched 2 charts with indicators at the below link that should come up in seperate
pages so you can follow along as I am not able to put text on the charts so I will talk you
Rule #1. Even though it appears to be the same, you need to trade your etf's using an
index as your guide with your TA parameters on it. For Example, I use the SPY which is
the s&p 500 spydrs to indicate when to enter and exit SSO snd SDS the 2x long and short
S&P 500 etf's.
I would use the same for Lg Cap etf's like BGU and BGZ or you could use the $DJI as the
index. and so on. QQQQ is what I use for QLD and QID. You get the idea.
Rule #2. I plot a 10 SMA line on the chart of the Index, A MACD with histogram, A fast
stochastic (12, 3), ADX (14), and sometimes use MFI (money flow).
I also plot the same indicators on each Etf chart for reference.
Now for the entry and exit points. Obviously we all want to enter at the bottom most point
and exit at the top most but that is very difficult and requires luck, We don't need luck as
there are simple rules to follow.
When you get the signal to sell your Long biased Etf, that is also your signal to buy your
opposing Short biased Etf. This keeps you in that market, making money in both directions
instead of having to sit and wait for a Long, entry again.
So look at the SPY chart. I could only use a 9 month chart so the indicator lines are a bit
cramped up but you will surely get the idea.
Start back in July. Now we use the Macd histogram, the Stochastics and the ADX as our
signals for entering a trade. If you start at July first, look at the lower indicators, Macd is
still heading down, stochastics have just hit a med peak and starting back down, and ADX
green line is still heading down, so no entry yet.
About the 10th of July you will notice the Macd histogram bottomed out and has a couple
shorter bars and the fast line is curling up heading to cross over upward. I generally count
on the stochastics cross over as a better indicator Plus notice the ADX green line has
bottomed and has started back up towards the crossover. Note, the deeper the stochastics
is in overbought territory below the 20 line the more pronounced the upmove will be when it
Using those indicators in the way I have described will not get you in at the exact bottom,
but should get you in on the longer green bar that closed right on the 10 line on the chart.
Rule, You stay in the trade until a candle CLOSES below your 10 ma line on the chart.
In this case, you would be in this trade for approx a month. Looks like about the 10th of
Aug when the red bar closed just a fraction below the 10 ma line.
In an uptrending market your long moves will be approx 4 times longer than your short,
downward moves. Conversely, in a downward trending market, your short moves will be
the longer trades.
Don't go all in, as no trading system is fool proof by any means. I alway try to anticipate a
bit and go in probably earlier than I should, so as the indicators line up, if I went in a bit
early, I just add to my position when the crosses take place.
I think you can figure it out from here. I know for some of you this is too simple, but I am
hoping this effort has helped some of you out there struggling to win at this game.
Sometimes if I am anticipating a move I will start a position with a 1x or 2x etf and when I
get full confirmation from the indicators I will add to my position with a 3x etf. There are lots
of ways to use this for your advantage.
Also, notice the Macd line from Aug to Feb how it is trending downward while the market is
trending upward, this is divergence, that tells you the market is running out of steam.
One last thing, Sectors run hot and cold. But they are quite predictable and using Sector
Etf's is highly successful. Happy Trading, 10x.
I have started a Forum, SHADOW ISLAND. Feel free to stop by and read about news and info you won't get from the main stream media. We trade ETF;s Gold and silver miners and small caps including otcbb, nyse, nasdaq, amex, Under 10.00 per share. Rules not firm. This is still America and we believe in freedom of
speech. No cursing please. http://www.thelion.com/bin/forum.cgi?tf=shadow_island