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One thing you have probably noticed is that there is no end of systems, strategies, and methods that are available for ETF traders. Many of these strategies and systems are hybrids or clones of other systems that are effective and have been used for several years. Some traders will advocate an ETF trading system while other do not use any systems or strategies.
Michael Eckhardt and Richard Dennis wanted to answer the question of whether a person could learn ETF trading, and succeed, using a simple system. Their experiment, in’83 proved that anyone can learn to trade successfully if they follow the rules of a system and act on them accordingly.
The Turtle ETF trading system also showed that even though a system is simple. For instance, all systems have a Step 1, Step 2 approach, most people deviate from the system even when they are winning.
One of the reasons that some people have problems with systems is that most have two elements involved. There is vector rotation and trend following. An ETF trading system may be very successful and consistently effective. But, a person who hates to follow trends or rotate their vectors will not stick with the system. They are also unlikely to follow the other rules of the system that would help them with exiting before losing points.
All systems have some flaws. For some, the flaws are minimal and traders adjust the system to address the problems. The’83 Turtle ETF trading system was no different. There are many hybrids of the Turtle system available that have been tweaked. Some do not resemble the original system even though the users of the system say average annual returns of up to 80%.
The system that you select will give you a structured set of rules that, when combined with your strategy, will help you to gain entry when the trend is first starting and exit when the trend starts to move. An important part of a systems effectiveness is using it with the right ETFs.
The pairing of systems with strategies can provide the kind of results that a trader is looking for. Matching an effective ETF trading system with an effective strategy will require that a person do some research on the consistency of both system and strategy when paired with particular sectors.
Knowing the history and consistency of a system is also important. There are many systems introduced that do not have a history of consistent effectiveness. The tendency for some is to start using a system without knowing it’s average earnings ratio. By doing some research on a system before you start using it you will be able to set realistic goals on your returns. You will also be able to pair the most effective strategy with that system to maximize your results.
Traders and professional are an invaluable resource. Finding out what ETF trading system works well in a particular sector can save time and money. By discussing the different elements of a system it is possible to learn about, a prepare for, the flaws in that system. Finding the system that most closely matches your personal trading style will also help you to create a winning system and strategy when you begin trading.
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