Leveraged etf trading strategies
The etf you are trying to read is not available now. Thank you very much; you're only a step away from downloading your reports. You will receive a download link right in your email inbox for each of the free reports that you choose. How to Trade Leveraged ETFs. By Leveraged Meade Jun 11, Simple rules the individual investor can follow to invest like a hedge fund pro. This is the first time in strategies history that the retail investor has the same investment tools that hedge fund managers have been using for years to produce huge market-beating returns regardless of market conditions. The reason retail investors are constantly losing, especially in today's market conditions, is because they are too one dimensional. For the most part, they invest in traditional stocks and bonds. And they do so through mutual funds or individual stocks or bonds. In a hyper-competitive investment climate, this dramatically limits their ability to be compensated for the risks that they take. This economic environment has exposed that fact. Hedge fund managers, however, don't have these restraints. They can invest in any asset class: Moreover, they also have the ability to go short. This is a key advantage that you won't find in a passive, asset-gathering mutual fund. It's this flexibility that is crucial to investing success, as we have seen in recent years with the unprecedented volatility and bear markets that leveraged devastated long-only stock investors. Invest Like a Hedge Fund Pro With Leveraged ETFs Leveraged ETFs give the investor unique abilities these days: They allow them to invest globally, to invest with leverage, and to take advantage of both up and down markets. In essence, the average investor can now create their own custom absolute return, long-short global macro strategy. And they don't have to be a millionaire, or pay chunky minimum investments and high fees to get it. Absolute return means that in any market condition -- bull markets, bear markets, or sideways markets -- you can always pursue positive returns. You aren't a slave to the broad market indices. Billionaire global macro investor Stanley Druckenmiller was a pioneer in absolute return, long-short strategies. He used leverage and the ability to go long and short to produce one of the greatest track records in history: And these securities are maturing nicely. The liquidity in leveraged ETFs is becoming very deep. These trading ETFs trade well over 10 million shares per daywith some trading over 40 million shares per day. Also advantageous, leveraged ETFs can be traded in a variety of accounts such as IRAs. And unlike futures, these securities won't expose you to unnecessary broker risk. Not only is it burdensome to open up a futures account, but it is also dangerous as we have seen from the collapse of MF Global and Refco, which literally lost investors entire accounts when they collapsed. Futures accounts have margin requirement while ETFs do not. Plus, leveraged ETFs are SEC registered products, which are relatively simple and easy to use. So why aren't more people trading these products? Well, part of it I blame on etf. Many advisors, and the financial press, have called these products dangerous, expensive, and flawed because of tracking error issues. All of this is blown out of proportion, in my opinion. Properly using techniques like stop losses, and properly reading charts, will help the investor control the risk of these products. Secondly, these products are only expensive if you buy and hold, which you should never do with leveraged ETFs; these are trading vehicles, not ones to hang on to. The average expense ratio on a leveraged ETF is 1. For example, if you hold a leveraged ETF that has a 1. Moreover, leveraged ETFs are actually the cheapest way to short. When you short a stock, you have borrowing costs and margin costs. When shorting with leveraged ETFs, you have no borrowing costs and no margin cost Third, many financial pundits have said that these products don't do a great job of tracking the underlying index they trade. That is not accurate; of course, there will be times when leveraged ETFs do not perfectly track their benchmark, but its only for a very short period of time, and it is such a small amount that it isn't even noticeable. I have been trading these products for over three years, and I will tell you that the biggest tracking error or difference strategies the leveraged ETFs benchmark and the leveraged ETF is around. And the more liquid the ETF, the less the tracking error will be. Next I will tell you how to get around this tracking issue. How to Trade Leveraged ETFs Here is a list of rules and guidelines that I have compiled throughout my experience trading and researching leveraged ETFs. I have been researching and analyzing leveraged ETFs for over four years since their inception first as the director of ETF Research for Zacks Investment Research and currently in my hedge fund Leveraged ETF Capital. Liquidity and volume are key. This is probably the most important rule: Only trade leveraged ETFs that are trading, and that have an average daily volume overleveraged. This is important because you are assured of getting a tight bid ask or spread, etf it costs you less to buy the ETF. A liquid market ensures that you can buy or sell at any time. Only trade leveraged ETFs; never buy and hold. My holding period is anywhere from one day to six trading. By following this guideline, you will never have to pay the full management fee of these products, which will keep your costs low. Always use stop losses. Leveraged ETFs are volatile and can offer huge double and triple digit returns in a very short period of time. However, to make sure you never lose a lot of your trading capital, you must use a stop loss. This doesn't mean using a mental stop loss or telling yourself, "I am going to sell when it crosses XYZ price. This assures you that your loss will be minimal. I cannot reinforce this practice enough: Always, always place a stop loss with every single leveraged ETF trade. Trade off the benchmark or asset charts, like Nasdaq or commodity spot prices, not the chart of the ETF you're leveraging. If you're using technical analysis which I suggest doing with these investment products because they are trading vehiclesalways use the actual benchmarks chart to generate trading signals. Do not use the chart of the leveraged ETF. This means that if you want to use a leveraged ETF to trade oil or gas, use the actual spot price of oil chart or the spot price of gold chart to generate your trading signals. These charts are more reliable and better indicators of the sentiment of the market than the actual ETFs. For example, if I looking at a chart of the Nasdaq Index, and it looks like it is technically breaking down and I want to short the Nasdaq, I will wait for a break on the actual Nasdaq chart to make my trade, and then buy the inverse or short Nasdaq ETF to make my trade, I will not use the chart of the inverse Nasdaq leveraged ETF Catalyst- or event-driven strategies work very well with leveraged ETFs. When a significant news item comes out that affects an industry's leading stock or its sector i. This is because sectors trend much better than stocks. If the whole financial sector is down significantly on one trading day, this is far more important and a better predictor than just one stock in an industry being down. Therefore there are better odds that the direction of the industry will continue to trend down. The most profitable time to trade leveraged ETFs is when then fundamental and technicals agree. The fundamentals should follow or match the direction of the trend or breakout that is occurring on the chart. A great example of this is crude oil today. For more information on which specific leveraged ETFs are the best to trade, backtested and proven highly profitable trading strategies, daily trading ideas based on macro and market news, or money management, please contact Global Investor Monthly. View As One Page. Follow Us On Twitter. Get The Minyanville Daily Recap Newsletter. Stay current on financial news, entertainment, education and smart market commentary. WHAT'S POPULAR IN THE VILLE. The Global Cannabis Race Is On. Best Quality Dry Herb Vaporizer. Bathroom remodeling - A Comprehensive guide. Can You Trade Based Upon Market Psychology? Business News Trading and Investing Sectors Special Features MV PREMIUM MV Education Center Video. 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More Holiday Humor, this might break some of the sour taste going on in the SB game. Dec. 6, 2009 - COMPANY MEMO FROM: Patty Lewis, Human Resources Director.