Day Trading ETFs : How I Trade Exchange Traded Funds - Stock Trading Forum | Forex Forum

Ken · #1 (**permalink**) 08-31-2010, 08:13 AM

Hi traders,

Here's a few helpful tips to share insights on how I personally like to trade ETFs. (for more, see my new course at http://www.ETFMastery.com ).

PREMARKET:
I always check the premarket gaps in SPY, then others like FAZ/FAS, QQQQ, TZA and other ETFs to see what direction they are gapping in, long or short. I also pull up my nasdaq premarket futures chart to watch the trend between 8:15am- 9:30am EST opening bell.

At this time, during the premarket, I'll be setting my buy stop orders (and adjusting stop losses for overnight positions) to activate new trades during the trading day ahead.

IN-MARKET:
Once the opening bell rings, I like to give it 5-8 minutes to settle open orders, and seldom initiate new trades until at least 9:38am EST or so.

My favorite patterns are gap continuations; for example in these charts I do not know yet if they will continue up in-market (it's 8:12am EST as I write this, on August 31, 2010)... but if they do, I will enter new orders to get in on continuations. The specifics are covered in ETFMastery.com; I can tell you that I do like to scale in to winning positions on continuation plays as a favorite scale-in strategy for strong-moving ETFs.

Take a look at these premarket gap up charts in the short ETFs: (note that since these are fairly strong gaps, and in the down SPY chart, they may consolidate or fade back into their trading ranges). Either way, I'm prepared to trade them.

Example: gap up in these short ETFs:

Note that since the above are all Short ETFs, they move up when the SPY gaps down, like this:

This is an excellent way to trade a "down" day, eg buying the short ETFs when the market sells off.

One key strategy is to look at the directional trends of these ETFs during the premarket, from 8am-9:30 am EST; this is a core strategy I cover in the ETFMastery.com system (and upcoming members-only webinars).

I'm also always scanning for micro-cup breakouts and breakdowns in the ETFs using premarket charts like the ones above. I show how to set entry triggers using micro-cup moves in the ETF Mastery course. It's a very powerful technique, I use it to exit winning overnight holds, as well as setting triggers for the trading day ahead.

Ken · #2 (**permalink**) 09-07-2010, 08:41 AM

ETF Update September 7, 2010
8:44am EST

As I write this on a Tuesday premarket morning following the Labor Day 3-day holiday weekend, the markets are in minor bear mode, given the gaps down in SPY, and gaps up in the bear/short ETFs like FAZ TZA, as you can see below.

Yet this morning's open is one I will not trade strongly Unlesss or until these charts get outside of their prior trading ranges. Let's take a look:

What are these charts telling you?

ETF TRADING STRATEGY POINT #1: Avoid trading "inside" opens

Knowing when you have an advantage, an "edge", is important to trading successfully. For me, I know I take the most stop-outs when trading inside range days (days in which the ETFs open inside the prior session's high/low, as we see today). For examples of "out" charts, in contrast, simply see the charts in the article above/prior to this one from Aug 31st's premarket... see the difference?

How to set entries and exits on "inside" range days? That's covered in the ETF Mastery System. Order now if you haven't already done so.

ETF TRADING STRATEGY POINT #2: Look for major cup patterns, as well as candle hammers and shooting stars for initial trading signals.
It's important when using technical entry triggers to be able to find when to buy or sell each ETF that you trade. Personally, I use a very specific, well thought-out strategy to initiate my trades using specific cup patterns (both "micro-cup" as well as major cup patterns), as well as candle chart patterns and more.

How to use micro- and major cup patterns, plus specific candle patterns to set entries and exits for fast-moving ETFs? That's covered in the ETF Mastery System. Order now if you haven't already done so.

ETF TRADING STRATEGY POINT #3: Use position sizing to initiate small-share initial "test trades" to probe the market for entries, without risking a lot of capital from the beginning. Work into successful trading positions, and use close trailing stops to protect profits.
Whether you're a day or a swing trader, knowing how to use different, specific proprietary position sizing tactics designed especially for trading ETFs is a key to potential trading success. I like to start small, ramp up quickly once I'm in the money, then tighten in a trailing stop once it's moved up enough in my favor.

HOW can you best use position sizing tactics to manage your entries and exits? That's covered in the ETF Mastery System. Order now if you haven't already done so.

Therefore, today I will only be trading aggressively if and when the SPY gets outside of it's prior sessions' range (109.3 - 111.0), preferably if it breaks new highs or lows during the first hour or so of the market's open. My bias today is 'be cautious since in-range low volatility premarket gap.

=> For more, be sure to order your ETF Mastery System today.

I hope this has been helpful; best wishes for success in this week's volatile markets. To be continued...