Trend investing into ETFs may be the most convenient way for many to do the best with their money. ETF trend trading is the more safe and relaxed version of swing trend trading stocks.
It is reasonably safe to put money into ETFs, because they are funds and as such diversified.
There is a vast number of ETFs. Some are better for an investing style and others are better suited for traders.
Stocks can be always blended into the mix if there is a special situation.
There are some caveats, however:
ETFs and ETNs that are leveraged by a factor of two or three (double or triple) or that are inversed (short) do poorly in the long run. They are more for trading, either intraday or for swing trading for some weeks.
ETNs are no funds generally and so they lack diversification. They are also equivalent to subordinated dept notes. If the issuer goes bankrupt their ETNs will most likely go to zero.
During the flash crash many ETFs proved to be illiquid. Within minutes they crashed down to zero, only to recover within minutes to their real value, which was still intact all the time. Stop loss techniques should be accommodated for this idiosyncrasy. Have a look at the intrinsic value.
So, how to do it? The very simple way would be to just subscribe to a good ETF signal service. That is the convenient way. The question is whether it works or not. In this case, the answer is yes 😉
All swing and trend trading systems can be combined with an investor’s buy and hold system. If a position has advanced quickly, switch the trading system to an investing system and you are invested for the long run.
The slightly more sophisticated way of convenient investing would be to let a program do the trading. Will that work, you are probably asking now. It depends on the software, of course, but there is no reason why a fine piece of neuronal trading processor should not outperform the average trader. Yes, that’s right. The typical trader and even more so investor will not be able to beat this trend trading mastermind.
You are an investor? Look for the right ETFs to invest into, growth stocks may fit the bill also, and let the machine do the nerve-wracking trading part. Just trust it. Hold onto very good looking trades by ignoring the next sell signal and just implement a stop loss somewhere above your entry price. Some sort of trailing stop or a replacement method completes this system for the trading investor.
To sum it up, the fine trend investor combines a safe stop loss strategy with a huge potential gain by doing the strategy-switch:
- One or the other way can be used to swing trade stocks or whatsoever that has also long-term potential.
- If a trade gets quickly green and gains pile up, switch the strategy to something like buy and hold.
- Switch out of such a position after it ran a long time, got tired a bit, and a younger position just made it to the buy and hold mode that likes to replace the exhausted one.
In detail this strategy is described here.