The stock market got seriously enriched by the ETF world. Having commodity or currency driven prices in the mix greatly enhances possible diversification. Before the birth of ETFs the last resort was often to short stocks when the market went south. Not the right thing to do for trend traders. Why? Trends tend to be choppier if going down, at least for volatile stocks, and then the maximal gain for short trades is limited.
Fortunately there are now ETFs tracking more and more goods and markets. Of course, the penny stock market offers diversification for the investor also, with their often disconnected price behavior. But penny stocks are not everyone’s cup of tea.
Fine, but there is still one question to answer, namely, how to trade ETFs. Compared with stocks it is more unlikely that you find a “growth-ETF”. There are market trackers that cover foreign exchanges, developing countries that could be viewed as growth stories . But in relation to a real company the growth driver is too fuzzily shaped.
For a company the growth motor is a product. Growth companies have one main product and not a collection of everything. Growth economies can only have many products. Thus they are destined to have less sharp and steep trends in comparison to growth stocks.
The ETF trend trading is therefore more reliant on exploiting swings. Trend trading with ETF is naturally swing trading or trend swing trading. Of course, ETFs could be viewed with investor eyes, buy cheap and hold until you are dead, but that is another story, a long one…
One drawback with the ETF market is their heterogeneity. Being a plus for diversification, it is still a challenge to investigate the precise conditions of ETFs. They vary drastically, e.g., the collateralization. Helpful is some external help! If such a service is more geared towards the trader and makes dynamic scans of the market, it may be a base for trading ideas.
A static list of ETFs ordered by this or that criterion may appeal to the investor, but is rather useless for a swing trader. Having trading signals for ETFs alone, say, with a trading oscillator software, misses the other part of the equation, the preselection according to the fund-amentals. The combination of ETF selection and swing trading signals could be the base for trading ETFs. A trading base? Yes, take this as a trading idea source, perhaps an additional one!