If you’ve just entered ETF trading you are going to hear a lot about different types of trading, methods, and strategies. One of the popular discussions will include ETF Trend Trading. Some people talk about trend trading as though it is a separate kind of trading that isn’t related to ETF trading as a whole. Some sites will talk about ETF trend trading as a way to increase one’s gains in trading.
Trend trading is doing technical analysis on sectors to identify trends then hopping in when a trend begins and getting out when the trend shifts. Sound familiar? If you are doing the homework to be successful, you are already basing trades on trending. This is not a secret method of trading that will require more effort than one currently puts in if they are doing technical analysis and historical data collection prior to trading. It is more focused on the analytical indicators, but is not different.
When people do a historical analysis of a sector before they begin trading, they may look at a specific block of time. Some people do an analysis on a three or five year period and note the different trending indicators in that period of time. But, what is a sector, has a significant gain or loss every seven years? If a person has not included those years in their analysis, they can miss an opportunity to make a significant gain in their portfolio.
It is very easy for a person to get caught up in the analytics of sectors when they are trying to make the most favorable trading decisions. In order to keep from being bogged down in the details and lose valuable time trading, it is a good idea to decide what type of ETF trend trading you are going to do as far as technical analysis and stick with it.
When a trend is analyzed that covers 1-3 years it is called a short term trend. Doing a short term trend analysis is effective is a person is working on a sector that introduces a product or makes a research discovery every one to three years. But, there are a lot more opportunities shown in that short term chart that one may miss if they have not done further research.
Intermediate term trends are the trends that occur within a long term trend. When analyzing trends, if the reason for an intermediate trend can be effectively identified, and a pattern found, there is a significant opportunity to make gains on those blips that occur in the sector.
Who makes ETF trend trades without doing the technical analysis that is required, will often come in just behind or just ahead of a profitable trend. By having the data and trends identified early a person can come in at the start of a healthy trend and get out before it reverses.
There are opportunities for individuals with long term ETFs to take advantages of trend trading as well. Even long term ETFs reverse course. If a person has done the analytics on a sector over a thirty year period and sees when the trend is going to reverse, they can take appropriate action before losing assets on the sector they are involved with.
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