Like Mutual Funds, ETFs can provide exposure to whole markets like the Dow Jones, international Indexes like Asian indexes, a particular sector like renewable energy and currency and commodity ETF make it possible for anyone to invest which was in the past only accessible to the traders of futures and forex.

Even if your broker suggested you a particular ETF or you found out about an ETF opportunity from any other signals it always makes sense to find out for yourself about ETF performance. There are several ways you can find out about how ETFs are performing

• You can subscribe for ETF Newsletters: There are plenty of ETF newsletters available out there, apart from sending you the latest news of ETF these newsletters also send weekly or monthly performance of some of the top gainers and top losers from the list of available ETFs.
• If there are some ETFs that would like to buy and you are using a trading software or web based system you can sort out these ETFs and keep a track on these ETFs. Looking at their performance you can take an informed decision on either to go long, go short or just look at some different investment.
• There are also several websites like MSN Money, Google Finance, Yahoo Finance which would have detailed information on list of all the available ETFs and how is their performance based on their one month returns, three months returns, six months returns, one year returns, three years returns or any historical data one would want to analyze.

So once you know how ETF trading works don’t just jump into the unknown waters, keep a track of ETF performance find out what are your short and long term financial goals and accordingly make an informed decision.

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Some of the examples of Divided ETF are:

1.)    Power Shares Dividend Achievers (PFM): is a portfolio where the fund has invested in group of diversified dividend paying companies. Amongst these companies some have increased their dividends from last twenty two years on an average and annually by 12% from last ten years. Top five companies where PFM has invested in today are Wal-Mart Stores, Inc. (4.97%), Johnson & Johnson (4.77%), International Business Machines Corp (4.7%), ExxonMobil Corporation (4.67%) and AT&T Inc. (4.66%).

2.)    Power Shares International Dividend Achievers (PID): this portfolio tracks the dividend growth of international companies which are listed in the American exchanges as ADRs over a period of five years. Top five holdings of this portfolio is Banco Bibao Vizcaya Argentaria SA ADR (4.47%), Vodafone Group PLC ADR (3.18%), CRH PLC ADR (3.09%), Southeast Airport Group ADR (3.03%) and National Grid PLC ADR (2.77%).

3.)    Power Shares High Growth Dividend Achievers (PHJ): is a portfolio of hundred dividend paying companies which includes companies that has the highest dividend growth rate annually for 10 years. Top five companies where this funds have invested are Wal-Mart Stores Inc. (4.66%), International Business Machines Corp (4.45%), PepsiCo Inc. (4.31%), McDonald’s Corporation (4.02%), Johnson & Johnson (3.92%).

Since the olden times when traders started investing in stocks listed on the exchange, Dividends have been a vital basis of returns out of stocks. If tax laws are not given importance dividends become a crucial aspect for many investors portfolio. So this is a great option for all the traders out there who wants to invest in ETF and wants ETF dividends.

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What would you need to pick up and being with Exchange Traded Funds? If you are already a trader needless to say this but for those who has never traded into any kind of instruments, one needs to open up a brokerage account with a bank or financial institution. It would be really helpful to discuss how are the experiences of some of the clients of the broker you want to get associated with and also talk to the broker about your own investment plans.

Next would be to do a good research on the ETFs that interests you, then sort out the ones which you would like to buy and discuss these ETFs with your broker. Broker might look at the options and suggest you that according to him where should your money be invested based on the market research, expected future market conditions, growth aspects etc. Depending on your short and long term goals you can sort out the ETF investment that works out best for you.

Today the chances of market volatility is at the peak, not so while a go more than 85% of 401k’s were in red and in really bad shape. With 401k there is little in your control, but in case if you have invested in ETFs you can set up parameters. So if you are willing to take risk that if the funds value falls up to a certain limit you can bare the risk but if it falls further you can put a stop loss. With this feature you can put a limit on the losses you may have to bear in case market crashes.

You can put a trade order with your broker by phone or take help of the latest trading software and web based systems. Periodically meet with your broker or keep a check on your portfolio to see where you stand.

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Let’s look at how Trading Signals are being created and then we will see after creation how they are being broadcasted to the traders. Based on the below mentioned ways ETF Trading Signals are created:

Technical Analysis and Chart Analysis: is analysis of ETF where in the historical data primarily price and open interest (volume) is being tracked. Various quantitative models like moving averages, correlation coefficient and regressions are being employed to the price and volume data and future patterns are predicted. Trends and Patterns seen in the Charts are also being analyzed; examples of some of the popular chart patterns are head and shoulders, Symmetrical Triangles, Ascending Triangles, Descending Triangles and Flags and Pennants. As per the technical analyst it doesn’t matter what is the market movements is it bullish or bearish if you know how to read the patterns it can guide you when to go long and when to go short on a particular ETF.

Fundamental Analysis: over here the fundamentals of different companies where the Exchange Traded Funds have invested is being assessed. To be precise if an ETF has invested in stocks of 30 companies, variables like assets, liabilities, present and forecasted sales, growth in profits, competition, competitive advantages and likes are being assessed for these companies. Based on this assessment trend of an ETF is forecasted and a signal is being sent to the traders.

In their ongoing research Fund Managers or Investment Analysts may find a great investment opportunity. It could be for taking advantage of forecasted high returns or it could be for using an ETF to hedge your risks against a possible future crisis in the markets. There could be several different ways of broadcasting ETF Trading Signals like traders can subscribe to a newsletter, our software or web based trading system could prompt us a signal, we may receive a call from our broker or these days traders can also subscribe for text messages which send trading signals.

If you are interested in ETF trading signals which provides over 100% profit guarantee or you don’t pay 60 day satisfaction than Click here to know more.

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On the other side ETFs are completely opposite and comes into being with the stocks and not money. What I mean by this is Huge financial institutions already have invested billions of shares, so to create an ETF they strip off a part of their investment and gather a set of different stocks that fall under a particular category. Gathering a set of different stocks an index like fund is created which is being registered with a stock exchange and shares of that fund are being sold on the exchange. More shares of the fund can be added to the market if the financial institution decides to increase their investment in that set of different stocks.

Further, traders are choosing to invest in ETFs over Mutual Funds. Mutual Funds directly can be bought from Bank or Financial Institution with no sales charge or “load” but the management fees typically turns out to be high and on the other side you can buy or sell only at the closing price at the end of the trading session. ETF wins the competition if a trader is looking at ETF vs. Mutual Funds as the brokerage fees, expense ratio as well as taxes are lower with ETF and to top that ETF can be traded like a stock on the exchange.

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All of you out there must be aware about mutual funds and how do they work, now here is a new more tax efficient and less expense prone investment. So expenses involved with ETFs are low and now comes the time to find out which ETFs best suits your requirement and matches your portfolio. There are many types of ETFs available today in the market, it always makes sense to invest in a particular sector rather than investing in a particular company’s stock so there are Sector Specific ETFs. With today’s market crisis one can hedge their risks by investing in Commodity ETFs which invest in Gold. Also in comparison to US markets Asian markets are performing much better so to take advantage of Asian markets there are international ETFs that invest in Asian indexes.

Once you have narrowed down the list of ETFs that you like, you should not directly jump into the market and start trading. It always helps to track a particular investment opportunity before actually investing in it. So if you are not using a Software or Web Based application you can visit Google or Yahoo’s Finance portal create your own portfolio for free, add the ETFs that you like and keep a track on the price movements. Once you have seen which ETF performs best for you and also fits perfectly into your portfolio. All you would need is to have a Brokerage account and your broker’s number or if you are using a Software or Web Based application open up your system and start trading.

Some traders find ETF trading perfect to hedge the risks from their current exposures, while some find the returns from ETFs lucrative so they invest major portion of their investments in ETF. Reason could be any for ETF trading but sure there is a great investment opportunity around the corner.

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Below are some of the different varieties of ETFs available today:

1.)    Actively Managed ETFs: These types of funds are recently introduced in the United States. The very first Actively Managed ETF came into existence in early 2008 however it was liquidated by the end of 2008. All the information about actively managed ETFs are available in the markets, also on funds websites one can find daily updated list of securities in their portfolios.

2.)    Index ETFs: Some of the initial ETFs that came into being were Index ETFs, today most ETFs act as index funds which holds the stocks and try to replicate the act of a stock market index.

For example: iShares S&P 500 index ETF (IVV), iShares Dow Jones US Insur. Index ETF (IAK).

3.)    Commodity ETFs: Commodity ETFs are the funds that hold the actual asset and track the price of the underlying commodity and accordingly this ETF is traded on the exchange based on its Net Asset Value.

For example: Market Vectors Gold Mining ETF (GDX), SPDR Gold ETF (GLD).

4.)    Bond ETFs: They invest in Government treasury bonds, these funds are the best during the time of recession. People who stayed invested in stocks during the financial crisis not only lost their profits but also a part of their invested principle.

For example: iShares iBoxx $ High Yield Corporate Bd (HYG).

5.)    Currency ETFs: There are sub categories in this type of ETFs there are some ETFs which invest in multiple currencies and there are some that invest in a particular currency.

For example: Sterling Money Market ETF (XGBP), US Dollar Money Market ETF (XUSD).

6.)    Hedge Fund ETFs: Exchange Traded Funds over here tracks multiple hedge funds and follow their activities and/or strategies.

For example: Index IQ Hedge Mst ETF (QAI).

Now since you have made the decision of investing in ETF find the one that best suits your requirement and start rolling.

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If you are a trader who is not investing ETFs yet and having a hard time taking that decision, I will talk a bit on why invest in ETFs? If you are thinking why Exchange Traded Funds and why not invest in Mutual Funds instead the answer is: Sure you can buy Mutual Funds directly from a Bank or Financial Institution with no sales charge or “load”. However the annual management fees are typically very high with these traditional mutual funds and also you can buy or sell only at the closing price at the end of the trading session. On the other side if you are looking at ETF Trading it works as a stock you can buy or sell at any time during the trading session at the market price. You pay the brokerage fees just like stocks and other expenses involved with ETFs are lower in comparison to Mutual Funds. If one is looking at expenses involved with taxation, the taxes you pay while trading in ETFs is much lower as well.

Further about the range of available ETFs: There are ETFs available where in a trader can increase their exposure in a particular sector and at the same time keeping away from getting heavily invested in a particular company, one can invest in index funds which closely track the movements in the index and accordingly its price is set, there are ETFs that invests in blue chip companies or mid caps, looking at the market crisis these days international ETFs are also becoming popular where an American citizen can increase their exposure to for example Asian markets or Asian indexes, there are also ETFs where one can invest in precious metals like gold and many more.

So there is a huge list of ETFs available today for you fellow traders and depending upon your portfolio you can invest in the ETF that best suits your requirements.

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A trader can trade in ETFs by below mentioned ETF Trading System:

1.) Broker: Like any other stock you can also trade ETFs through a broker and once bought you can see the funds directly into your brokerage account. Some traders have always been investing in stocks, futures or funds via their broker and they are comfortable with the same system of investments they believe “why get into the hassle of buying and selling yourself if your broker is one phone call away.”

2.) Software or Web Based Investments: Unlike the conventional investors there are also many who are diverting towards taking matter in their own hands and would like to take the advantage or get out of the market when the price is right. There are many Brokerage firms and Financial Institutions offering Software and Web Based Systems where in trader can see the market movements, take the decision and act upon it. Software or Web Based ETF Trading System offered today have excellent features such as:

-> One can set up triggers for taking advantage of the market movements and buying or selling the ETFs at the price which best works for you.

-> These systems also offer tips so if there is a good buy in the market that investor should keep an eye on the system will prompt to buy that particular ETF.

Before getting in the system and start trading firstly a trader needs to find out which ETF is best for him/her. There are several websites which offers a tracking system where in you can track a particular ETF for a while see where is it going and if the track record turns out to be as you expected you can then buy that ETF. Google and Yahoo’s Finance section also offers a feature where in you can track a particular ETF.

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However investors should be aware about one aspect which can have an impact on their returns from ETFs. Investors should keep in mind that these instruments which are being traded on the exchange are subject to brokerage fee. Usually in the United States the brokerage fees hovers between $10 to $20, and at times it can also be as low as $3 with some discount brokers. As everyone is in the business to earn profits same is reflected in the brokers policies, so if someone wants to invest $300 per month may have a considerable proportion of investment ruined immediately, as opposed to someone making a $500,000 investment, the cost of brokerage fee may be minor.

Investor should also remember the expense ratio which is the administrative burden that the funds charges for investing trader’s money. As a trader if you are thinking on either investing in ETFs or mutual funds it’s important to remember that most mutual funds have higher expense ratio than comparable ETF expense ratio. For example: Mutual funds may charge somewhere between 1% to 3%, or more; while with ETF expense ratio mostly falls between 0.1% to 1% range. Merely looking at the percentage it may seem like a small difference but for an actual trader this difference in percentage can be an important driver while adding an investment to his/her portfolio.

If you are looking at all the expenses involved with ETF then taxation is also one expense to consider before making that investment decision. So again if we are looking at ETF in comparison to mutual funds since they are the most similar kind of investment instruments, from taxation perspective ETFs are more attractive than mutual funds.

The most important benefit for ETFs that it can be stock like traded on the exchange combined with the low ETF expense ratio makes it more lucrative for traders when they are compared with mutual funds, stocks, derivatives or bonds.

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Said that, if you are a trader and want to invest in gold there are several different ways you can increase your exposure in gold, however it’s also important to find out amongst all the different options which is the best investment basket for you. If a trader is looking at gold he/she can invest directly through bullion or buying a coin, or indirectly through gold exchange-traded funds, shares, certificates or derivatives.

Gold Exchange Traded Funds is a relatively new concept but since its establishment it has gained huge popularity amongst the traders. One of the top reasons for traders’ inclination towards Gold ETF is, why directly invest in gold and then find a buyer to square off your position if there is a fund doing the same and is being traded on the index based on its Net Asset Value (NAV).

photo credit: BullionVault

So if a trader is looking at Gold ETFs there are set of offerings which one needs to look at and find out which perfectly matches his/her investment portfolio based on his/her sentiments and strategies. Following are types of Gold ETFs available:

1.)    Gold ETFs that own Gold Mining Stocks: The model these ETFs follow is they hold stocks of gold mining companies from around the world.

For example :
Market Vectors Gold Mining ETF (GDX)

2.)    Gold ETFs which actually owns Physical Gold.

For example :
SPDR Gold ETF (GLD)
iShares Comex Gold Trust (IAU)

3.)    Gold Short ETFs: These ETFs believe that Gold will be seeing bearish trend and goes short on gold. So if the gold prices go down Gold Short ETFs prices will go up.

For example:
PowerShares DB Gold Short ETN (DGZ)
PowerShares DB Gold Double Short ETN (DZZ)

4.)    Gold ETFs that own Future Contracts: These funds only invest in Gold future contracts so some of the ETFs only tracks the upward movement in future contracts and some track the complete opposite.

For example:
Powershares DB Gold Fund(DGL)
E-Tracs CMCI Gold Total Return ETN(UGB)

Considering your current investments you can choose the Gold Exchange Traded Funds that best matches your portfolio and your strategy.

Should You Be Buying Gold Exchange Traded Fund Today? Click Here to find out.

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Further, everyone is pretty much aware about the new talk in the town that the future of Social Security doesn’t look that bright. As the time goes by and millions of baby boomers reach an age and approach retirement, the social security program’s funds will decrease and eventually disappear. To overcome this problem government will have to shrink in size and at the same time general revenues out of the tax payer’s money will need to be used to pay for social security. It’s wise to start looking at alternatives on how you can make yours and your family’s future secure.

ETF’s are turning out to be the best investment opportunity in current financially uncertain environment. So if you are a trader and are considering ETF Trading as an option you may need to subscribe to an ETF Newsletter which teaches you on how ETF’s work, what are the ETF related updates, news, tips and tricks.

There are whole bunch of ETF Newsletters available, following are some of the topics which they cover:

1.)    Some newsletters are specific to teaching ETF basics to the subscriber’s who wants to learn more on what ETF trading is all about. It tries to point out how to trade ETF’s and then it’s the traders job to find out how to use ETFs in his investment basket i.e. if the trader discovers that ETF gives great returns he can increase his investments in this instrument or it may fit in as a great hedging tool in traders portfolio.

2.)    There are several newsletters where the company has hired a group of traders who actually trade ETFs. These newsletters are more focused on what are the ongoing money making trends in ETF trading, what the strategies are, where these traders have made money and which actions to keep away from.

You can also try and do what I did before I actually started trading ETFs; I took 30 day free trial subscription of some of the top ETF Newsletters. It’s always best to test something before you actually buy it (wink).

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Sector ETF trading strategy: Some traders love trading in a specific stock, if your broker is asking you to increase your exposure to a specific sector it becomes tough to sort out which stock can give best returns in that sector. You don’t need to rely on anyone’s instincts but also you don’t want to miss out on the bus. In this situation the best strategy for a trader can be to look at Sector Specific ETF’s.

Stock ETF pair strategy is one of the favorites of hedge funds. Let’s say if you are eyeing at getting highly invested into a particular stock because you think it will give the best returns in comparison to other stocks in that sector, but you are worried about the direction of the whole sector on the next go. In this case you can buy the particular stock and short that stock’s sector ETF. Reverse is true also if you think a particular company’s stock is going to perform worse you can short that company’s stock and on the other side go long on sector ETF in which that stock belong to. Since the trader is hedging his position this can be a great investment opportunity that is if he has intimate information about some company and an industry. However this is not a “No Risk” strategy, if the company’s stock as well as the sector both moves in completely contradictory directions of what a trader thought he has to bear a loss on both the trades.

If an investor usually has huge cash sitting in his portfolio, rather than exposing his investments to money market funds a trader can invest in short-duration Bond ETFs. Return on investment in these ETFs is two to three times the returns a trader gets by investing the same funds in money-markets.

Therefore don’t let the current economic conditions discourage you because there are ETF trading strategies with which a trader can not only earn their bread and butter but if used effectively can help you beat the market and make a fortune out of it.

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Why use risk controls?

Every trader/investor must guard himself against drawdown’s, which refers to the percentage drop in his account size after one losing trade or consecutive losing trades. For example, imagine that after losing a few trades in a row, your $20,000 account is reduced to $12,000; that would be a drawdown of 8,000/20,000 = 40%. If I were to ask some new traders, “In order to be back up to $20,000, what percentage return do you need to generate?” Many would answer, “Since I lost 40%, I have to make back 40%!” This couldn’t be more wrong! Note that after losing 40%, the trader now starts with a lower base, i.e. to undo the $8,000 loss, the return he needs to generate is 8,000/12,000 = 66.6%! That is why I share free training videos on my website to help dispel some of the myths of trading.

The more severe the drawdown, the harder it becomes to undo the damage, as shown in the numbers below.

Drawdown % % Required to get back to break even
10% 11.1% (This is easy to make up in one good trend)
20% 25% (This is also fairly easy to make up)
30% 42.8%
40% 66.6%
50% 100%
60% 150%
70% 233.3%
80% 400%
90% 900%

That is why all professional money managers only risk 1-2% per trade. It’s because no matter how good your trading system is at some point it is a statistical fact you will have 10 losers in a row. Based on risking only 1-2% per trade this is only a 10-20% drawdown and easily recovered. 99% of the hype trading and investing courses in existence don’t say or do this. They say risk 5-10% per trade. It is wrong and will cause you serious financial pain if you follow their advice.

Many of them also use arbitrary stop loss advice. For example, they say, “Place your stop at $100.10 because that is on the other side of a major support or resistance, trend line, MA, etc.”

This makes your risk based on the size of the stop. That is also wrong because the risk can be too large and it’s not the same risk on each trade.

Others reverse this and say risk only 2% total period and let that determine your stop. This is also wrong and will hurt you because it is important to have the correct technical stop.

The answer is to do both. Use a percentage and technical stop together. It works like this. Let’s say the technical stop is $100.10, but based on your entry price that is a 3% risk. Since your plan calls for a 2% risk you simply lower the number of shares you are trading. This lets you stay within your 2% risk and have the correct technical stop. This is exactly what most professional money mangers do.

Some say that this will lower their profits because of trading fewer shares. So what! Study the numbers above again. You know the old quote, “More risk equals more reward.” Well it’s not always true. Sometimes more risk equals more risk! If you lose your money you have no chance to make a profit. Even losing 50% is disastrous because you would then need to make 100% to get back to even.

Like Warren Buffet says, there are only two rules in investing. Rule #1: Don’t lose money. Rule #2: Don’t forget rule #1.

I’d like to add a third rule. Correct money management and position sizing must be mastered to insure your long term success.

The good news is that it is easy to have correct money management and position sizing. I just explained how to use a combo of a % stop and a technical stop. If you want more of an explanation please visit my free video area on my homepage and click on the “Why have risk controls” video.

The system of entries, stops and profits taking is only half of your key to success. The other half is money management. If you get this part wrong you will lose your account every time regardless of how good your system is.

Click here for the newsletter on how to safely average 6% per month trading Exchange-Traded Funds.

PS- In order to access his powerful F>R>E>E videos you must first opt in for the complimentary report.

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Some of the not so obvious benefits are; more family time, less back aches, easier on your eyes than day trading 8 hours per day.

Click here for the newsletter on how to safely average 6% per month trading Exchange-Traded Funds

PS- For those of you that do love day trading, yes you can day trade this system and possibly double your returns.

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