How ETF Trading Signals Work
Here is how our trading system works and how you can use our buy-and-sell trading
First, I want to reiterate that this is a 100% technical trading system. It is based
on trend-following principles and considers that all fundamentals, news, etc. are
already reflected in the price. Price being the only important parameter, buy or
sell signals are generated when the closing price meets a set of predefined
How are our buy signals generated?
Our strategy works great on up trending (or down trending) ETFs, but not so great on
‘flat’ (no up or down trend) ETFs. This is why our software analyzes all US ETFs on
a daily basis, identifies those on an up trend, classifies them based on their
relative strengths compared to the S&P500 index, and issues a buy signal when one of
the top ETFs meets all of our predefined buy parameters.
If we have a cash position in our portfolio and the predefined general market
conditions are in ‘buy’ mode (basically when the overall market itself is in an up
or down trend), a buy signal will be sent to all our members.
If the general market isn’t in ‘buy’ mode (generally during flat markets), we will
stay in cash and wait for a new market trend before adding any new positions.
If all 3 portfolio positions are filled, the ETF will be added to our watch list.
How are our sell signals generated?
Basically, a sell signal is generated when the up trend is over (according to a
series of predefined parameters). A stop loss is also used to prevent us from large
losses (the only exception being in the rare event that a very large one-day loss
occurs as our system only works with the closing price).
How do you get the buy/sell signals?
As soon as a new buy or sell signal is generated, it is added to our ‘trading
alerts’ page and emailed to all our premium members. It is a simple and easy-to-use
Buy (Sell) XYZ (ETF name) at market.
New signals are generally added and emailed to our members a few hours after the
market closes and are valid for the next trading day.
How does the portfolio work?
Our portfolio has 3 positions at any given time and, depending on the market
conditions, can be fully invested or 100% stayed in cash. Money management is a very
important parameter in our system and we will stay in cash if there is no ETF that
meets all our buy parameters. We usually get complaints from some of our paying
members when we are mostly in cash, but one should remember that investing is about
making money, not being invested at any price.
How do you use the ETFs on our watch list?
The watch list was added to accommodate members that want to invest in more than 3
ETFs at a time. ETFs added to the watch list meet all our buy parameters, but could
not be added to our portfolio because all 3 positions are filled. They are monitored
on a daily basis as well and dropped out when a sell signal is generated. However,
we do not track the returns or provide any statistics for the ETFs on the watch
When you join, do you buy the ETFs we hold or wait for new signals?
This is probably the most frequent question we get and I do not really have a clear
answer to this. Basically, if you buy an ETF that was recommended a long time ago,
the odds are higher that it is near the end of its up trend. However, no one knows
what the market will do and it can still go up for months or, why not, years. I will
say if you are a conservative investor, wait for new signals – but if you are an
aggressive one, buy the ETFs we own at the time you join. Or use half of the capital
allocated to this strategy for the ETFs we already own and half for new signals. But
remember, when it comes to your money, the investment decision is 100% yours…