What Are ETF Trends?
ETF trends are guidelines used by traders to identify market entry and exit points, in other words when to buy and when to sell. ETFs are ?Exchange-Traded Funds?. They are something like mutual funds, but there are differences.
Funds, of all kinds, give small investors access to a wider range of investment choices. The funds are managed professionally and diversified. Assets held within the fund may include stocks, bonds and other securities. So, it resembles a smart investor?s portfolio.
Instead of being held by a single investor, funds are held by a large number of investors. The accumulated pool of money is invested and the profits, which ideally are larger than a single small investor could make alone, are shared.
A mutual fund?s net asset value (NAV) is calculated once a day. The value or price of an ETF will change throughout the day, as shares are bought and sold.
As little as one share of an ETF can be purchased and day trading is possible.
Mutual funds are typically held for long periods of time and a minimum number of shares must be purchased in order to buy in.
Trends are used in all markets, but the trends that are most important to an ETF investor are 50-day and 200-day trends. A smart investor identifies the trend before he or she buys in. Simply put, a 50 day trend would look at the average price of the ETF over the last 50 days. A 200 day trend would look at the average over the last 200 days.
A trend can cover any time periods. When analysts say that stocks historically earned average returns of 10-12%, they were looking at very long trends. Obviously, the historical trend did not hold true in the last several years.
Investors have different strategies when they are using trends, but a good rule of thumb is to buy in when you see an upward trend for the last 200 days and start thinking about selling if the value falls below the 50 day average. If it falls below the 200-day average, then the fund is trending downwards and it?s a good time to sell.
If you decide to use trends, you need to decide what you are going to do before you buy. How much are you willing to lose? If you buy in today and start making money, you are likely to lose some of those profits eventually.
Knowing when to sell is the key to making profits with ETFs. There?s no guarantee, but analyzing the trends should help you do that.
Source: http://www.lolsb.com/?p=2273
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