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Closing Price Strategy vs Settlement Price

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Closing Price Strategy vs Settlement Price
Closing Price Strategy vs Settlement Price, how is the settlement price different from a closing price

Closing price strategy vs settlement price: This video (and article) will give you key insights on how the “settlement price” is often different from a closing price, which will surely help you improve tremendously in your trades.

If you use the closing price, instead of settlement price, it can give you false readings for Fibonacci levels, Floor Trader Pivots and other support/resistance levels.

Amateurs use the “closing” price. Professionals use the “settlement” price. Which do you want to be?

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Closing price strategy vs settlement price

Welcome to this video on the closing price strategy vs settlement price. This comes into play, very importantly, when you’re using any type of indicators or techniques that have to do with calculating the closing price of bars, whether it’s indicators or intraday. For example, if you’re using floor trader pivots, this would be one of the biggest places where this could dramatically affect, potentially, where your floor trade pivots end up. And so if you’re finding that you’re drawing floor trading pivots based off the open high-low close, running it through the formula and the levels are not working for you, don’t dismiss them. It might be that you’re using the wrong price for the close and it could be dramatically off. So let me show you an example of that right now. Here we’ve got to the Nasdaq futures. This was Nasdaq 100 futures.

This was Friday, the 17th of November. And if we come here, first of all, if we go to the New York close, these times down below our California Times. So 13:00 is 1:00 California time, which is of course 4:00 New York time, so that’s the new year closed, but we don’t use that for futures. If you’re trading stocks, you would, but for futures, we go to 15 minutes after the hour and there we go. So you notice if down at the bottom where it shows the time and that’s 13:15. If I go to the next bar, market closes and opens back up again 15 minutes later. So 13:31 is when that bar closes.

How is the “settlement price” different from a closing price?

These are just one-minute bars, we did that to get a very precise timing on each one of these. In fact, if you go to the cmegroup.com website and you go to the data section, you can pull up the settlement prices and it will give you the open high-low close and settlement for every market, every contract.

Well, they’ve got the last price listed as 6308.75. They’ve got settlement listed as 6313.25 and. by the way, the last price traded in the close in the settlement can be three different things; that’s where it gets a little confusing for people sometimes. Is the last price traded at the close? The answer is no. And the reason for that, part of the reason I believe, is because if they use the last price traded, somebody could throw in a last trade at a weird price and really threw off the stats of everything, so it’s a good thing they don’t do that.

Settlement is the official number you really want, so when you go to the exchange, and this is the best way to get the settlement number is whatever exchange you’re trading on, go to your exchange website, check out to the market that you’re trading and look at their official settlement number, again, the term is settlement. And that’s the number that I would use for my floor trader pivots when typing in the close.

Settlement price example

So the settlement for this day was 6313.25. Now, the last price is listed on the cme group website at 6309.75, and that’s because they go over here. And if you look at it, the close of that bar is at 6309.5. Well that’s a big difference, right? That’s three and a half point difference. So three and a half points is going to make a big difference when you plug that in as to how your floor trader pivots plot. So make sure you use the right number. In other words, if you’re using the number on your charts, here’s what a lot of people do. They will just go to their chart and they would use either that number or they would use the number 6312.75.

So it can’t depend on your charts, this is the bottom line point, do not depend on your charts for the close of the day. You’ve got to wait. By the way, there is a whole a procedure for how they determine this settlement. Basically, several tiers in the way that they will do it, depending on what happens, that might be based on volume weighted average price of the last 30 seconds of trading or the midpoint of the low bid and the high ask or there’s a couple of different ways that they will do it in different months, different contract months to have different rules. So not no reason to go through all of that. Bottom line is just getting the right number, the way to get the right number is to go to the exchange.

Daily settlement example

Now, let’s look at a daily chart. So if your trading off of a daily chart, then of course, again, whatever the close is on the daily chart that’s plotted or printed on your daily chart, that’s going to affect your indicators. And the indicators that you use to the calculation of the close of the bar, especially. We’re not talking about affecting the floor trader pivots, we’re talking about really any indicators that you use that use the close. Now, what you want do is you want to go to, here’s this day, the 17th, activate the right bar. All right, there it is, the same day that we’re talking about. And you’ll notice that on mine, now I’m using kinetic data, and they do have the close as 6313.25, which is the same as what is printed at the cmegroup.com for the settlement that day.

So that’s good. That’s what you want. I would encourage you to check that out. See if your data provider, whoever it is giving you that number as the close on your daily charts. If it is, you’re golden, and if it’s not well, things are going to be a little different. This is why sometimes people say how come my indicators look a little different than yours even though I’ve got the same settings and all of that. It’s not the indicator that is messing you up, it is just simply that perhaps the data is just a little bit different since the indicators you’re using that data to plot its patterns, it’ll show up a little different too. Double check on that.

Wrapping things up on our closing price strategy vs settlement price

Good thing to check. You can ask your data provider and, by the way, your data provider may or may not be the same company that provides your charting software where may or may not be the same company that is your brokerage firm.

So you got to go to the data provider. This is a data issue, not necessarily a brokerage issue or charting software issue. So that’s it, might seem like a little thing and a lot of times it is, frankly. A lot of times the difference between the close or the last price traded or settlement is not very much. I think on this day and the S & P, it was about two ticks off. So that wasn’t too much. And there are days when it would be very close. Then there are other days, like this day, three and a half point difference. Now, that’s pretty significant and that will make a difference.

Our Favorite Rubber Band Trade Strategy

So if you found this video on closing price strategy vs settlement price helpful, if you learn something new, then great. You’ve got a moral obligation to pay it forward. Go ahead and click the share button below. That’s really the best thing you can do to help other people get access to this same information. This also encourages me to continue to create these free tutorials for you.

If you’re watching on Youtube, please subscribe. Click that beautiful thumbs up icon and I especially love your comments. Those also encouraged me to continue to create new lessons.

By the way, I’ve got a really special offer to my youtube subscribers, meaning, you. I’m giving you one of my favorite trade strategies called the rubber band trade. It has a very high win-loss ratio. And I’m going to teach you the whole trade. All the rules, right? It’s a simple trade, so I can do it in about 26 short minutes. You can get it absolutely free by clicking on the image in the top right corner of this video or in the description below the video. And if you’re not watching on youtube, there’s probably a link below or an opt-in form on the side. Once you do that, I will personally email the video to you with the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Closing Price Strategy vs Settlement Price? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

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Also, I’m giving away one of my favorite trade strategies that work in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

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Risk Management Trading Forex, Stock Market and Futures

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Risk Management Trading
Risk Management Trading Forex, Stock Market and Futures best tips

Risk Management Trading Forex, Stock Market and Futures: This video (and article) gives you insights into risk management and money management in trading, which will definitely help you tremendously in your trades.

This is some of the best risk management trading advice that works very well if you’re trading Forex, the stock market, and futures.

Was this video on Risk Management Trading Forex, Stock Market and Futures helpful to you? Leave a message in the COMMENTS section at the bottom of this page. 

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Risk Management Trading

Welcome to this video on risk management trading for FOREX, the stock market, futures day trading, swing trading. Really, trading is a lot about risk management. Professional traders care more about money management and risk management trading than we do about indicators, candlestick patterns, support resistance, all that stuff that most people are looking at. What time interval should it be trading, which is the best market, all that stuff, sorry, not the most important thing and what is most important is what most new traders completely ignore. New Traders, I find, are obsessed with indicators and the indicators can be helpful. They can be a part of your trading toolbox. No problem there. I’ve got a great indicator, by the way, that helps you to time your entries and exits with amazing precision when used as part of an overall trading plan.

And part of that trading plan must be, in fact not only a part but at the center, I would say, must be your money management and your risk management trading. So let me give you three examples of what I’m talking about and some of you are going to leave this tutorial being a little discouraged. You might even think you know what? Trading is even a lot harder than I thought.. I thought it was already hard and now I think it’s harder and if that’s what you think, good, I’ve done my job because it is harder than you even think it is. So here’s principle number one. So let’s say that you are trading a market. I’m just using round numbers here and I’m going to use some round numbers throughout this just to make the math easy for you just to illustrate certain principles.

Risk Management Trading Tips

So let’s say that you are in a market that’s at $10, whatever that market might be, your long, and it goes down to $5. So what have you lost? What percentage of your position have you lost? We’ve lost 50 percent of your possession, right? If you were in a $10, it goes down to five. Now your position is worth $5. You’ve lost 50 percent of your money. So now, how do you get back to even? Well, it just has to go back up to what, $10. Then you’re at breakeven. Here’s the tricky part though. It doesn’t have to go up 50 percent in order for you to get breakeven. Now that it’s down to $5, it actually has to double in price. So to get from here to here, the market actually has to go up 100 percent.

And that’s really what this whole tutorial is about today of how making money is harder than you even think it is, with an emphasis on keeping your losses small and letting your winners run. You’ve heard that slogan, well, I really want to emphasize to you how important it is to keep your losses small because letting your loss moving against you is absolutely devastating. More than you might even realize. So going down, you lose 50 percent. To gain that back, you’ve got to double the position, the price of the stock, FOREX, futures, whatever you’re in. And yes, the market is looking at percentages. The market is not as likely to go up 100 percent as it is to go down 50 percent. In fact, then you add the human dynamic in there that markets tend to go down faster than they go up.

Risk Management Techniques Used in Trading

And many people attribute that to mass psychology. That fear is a stronger emotion than greed. So now, we don’t only have to fight the mathematics of it here, now we’ve also got to fight human nature. And that’s another factor that makes it even harder to get your money back. The second issue I want to share with you today is about unrealized losses. This is where people are in a position and it’s still live. So you’ve got a position and it’s going down in value and you look at your P & L and it ‘s negative, but you haven’t sold the position yet. Therefore, you haven’t cashed in and balanced out your account. Now, a lot of people will say that those unrealized losses are unrealized which, in a sense, is true in the sense that you haven’t sold your position and locked in the losses

But I think that there’s a lot of people out there, in fact, I know that there are who don’t really think it’s a loss until you sell your position and that I totally disagree with. An unrealized loss is a loss right now. It is real and I can’t say it’s realized, but it is real right now. In fact, I even heard this in a podcast just yesterday we’re sadly a host of a financial podcast was saying that even if your position is down, he was talking about currencies, as long as you don’t sell, then you really haven’t lost any money yet. And boy do I disagree with that. Another place that you’ll see this is with options traders and they’ll talk about, we’re going to repair this losing option position and once we add this second leg, then you’re back to break even. Really? No.

Stock Market Risk Management Strategies

I’ve even raised my hand and classes where they’ve talked about these so-called option repair positions and confronted them saying, listen, I’m a future’s day trader and I can tell you when you’re down, you’re down. That money is not available to you. In fact, if you don’t believe me, call your broker. Let’s say that you’ve got a, again, let’s just keep numbers simple here, $10,000 trading account in and is down to a 5,000 of unrealized losses. And you want to buy another $5,000 worth of whatever. The broker is going to say, no, don’t think so. Then you’ll say but I’ve got $10,000 in my account, and he’ll say, no, you’ve got $5,000 and you will say, no, I got 10,000 because I haven’t cashed out. I haven’t taken the losses on this $5,000 loss, and he’s going to say can you say margin call?

So that’s how they look at it in the real world because that is the real world and that is real. Those losses are real right now. Whether you’ve cashed out to position or not, the money is not there available to you. You’ve got to understand that. And this, I think, is a false security that a lot of people have when they let their losses run, instead of keeping their losses really tight and cutting their losses is that they have this mindset that, well, it’s not a real loss as long as I don’t cash out the position. Wrong. Take that red P & L, in this case, the L, very seriously, it is a loss right now in real time and that money is not available to you. And it is a loss.

Money Management Trading

Now let’s finish up with a few other things. And this is, again, how important it is to avoid major losses and to cut your losses short. First of all, remember every time you take a trade, it’s immediately a loser. Every time you take a trade, you are immediately in a losing position. Why? Well, a couple reasons. Number one, the spread between the bid and the ask. Number two, what else we got? Well, that’s a bit in here. We got commissions, right? We’ve got fees, exchange fees, broker fees, and so forth. So every time you enter a trade, you’re in a losing position. Think of it almost like poker. We’ve got to ante up. So to play the game, you’ve got to pay these fees. All right?

So immediately, even though if your P & L on your charting platform doesn’t calculate this in and it looks like I’m up several ticks, but that may not include this. Now, some charity platforms allow you to calculate that in and that’s great. That’s actually how I set mine up because I want to keep myself aware of all that. Now, let’s talk about your winnings. So you win and that’s great. You’ve made some money. Let’s say that you made 100 bucks. Okay? No, you didn’t. Why? Because, well, first of all, you got to pay taxes on that. I’m in the largest tax bracket. And that’s roughly, we’ll again use round numbers, people in different states and countries are watching this.

Money Management Strategies

By the way, I am not a CPA or financial professional or tax professionals. Don’t take any of these numbers literally at all. Make sure you talk to your tax professional as to exactly how this is going to work out. But roughly I pay like 40 percent in federal tax, then good old California where I live, we’ve got our estate taxes. So that’s another what, Ten percent or so? And then maybe you’ve got your self-employment tax. We wouldn’t even put that in there, but if we put that, we’re up to 40 or up to 50, we’re up to 60 percent that’s being taken out then, maybe it got spousal support and maybe you’ve got child support.

And pretty soon, what do you got left? Maybe 20 percent? And now, all of a sudden, you realize that your winners, you thought you made, let’s say $10, but you only made two. And that’s on the winners. Then our good old friend, the government, generally, they are very happy to take a percentage of our winners, but they don’t really want to make much allowance for your losses.

Futures Trading Risk Management

So they will often limit the deductions that you can take on your losses. Again, talk to your tax professional about that. And each situation is different. People are in different tax brackets. How the tax is calculated, which taxes are calculated, all that will vary from person to person, situation to situation with your trade through a business or a personal account, countries, states, etc. So I’ve just got to qualify all of that. But the point is, you can see the big point here, you think you made, again, we’ll use the number $100 now and no, you made 20. Or maybe you made 30 or maybe even made $50 after all of this. Still, what you think was a big winner was only half as big.

So this is why it’s so important to not only cut your losses but let your winners run. Because your winner on your P & L on your charting platform, that isn’t what it is. That is not what you’re putting in your pocket. The reality is it’s going to be a lot less. Find out for yourself with your tax professional what actually will be for you as an individual. Okay, well now that I’ve got you all motivated about trading, but again, you know, at least I’m transparent, at least I’m honest about this. This is the kind of stuff you need to really understand that it makes it even harder to make money. So what you do need is a good risk management trading plan. You need something that’s realistic in the trading world so you can make some real money.

Our Favorite Rubber Band Trade Strategy

So if you liked this video on risk management trading, if you found that it was helpful, if you think others could benefit from this as well, please understand that it’s important to pay it forward and share that little button down there. Click that share button. It’s really the best thing you can do. Also, if you’re watching on youtube and you want some more good stuff, please click the subscribe button. That way you’ll be notified every time I release a new trading tutorial, which is about once a week. Click the thumbs up icon below and leave a comment. I love your comments.

I also have a special offer to you today. This is a trading strategy that actually does have a very high win-loss ratio, which I think you can see how important that is now, and I can teach it to you in about 26 short minutes. This is one of the most simple trade strategies that I have. It’s called the rubber band trade, and I’ll give it to you absolutely free by clicking on the image in the top right corner of this risk management trading video or in the description below the video. And if you’re not watching this video on risk management trading Forex, Stock Market and Futures on Youtube, there’s probably a link below or an opt-in form on the side. Once you do one of those things, I will personally email the video to you with the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Risk Management Trading Forex, Stock Market and Futures? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

FREE GIFT!

Also, I’m giving away one of my favorite trade strategies that work in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

Those interested in Risk Management Trading Forex, Stock Market and Futures video that works in today’s markets also showed an interest in this video:
https://www.topdogtrading.com/stock-market-volume-analysis/

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Spot Forex vs Futures Market Trading

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spot forex vs futures
Spot Forex vs Futures Market Trading, Best Spot Forex vs Futures Market Trading Advice

Choosing what’s best and works for one’s trading method is one of the many factors that contribute to winning the market, whether it’s on spot Forex vs futures market, etc.

This blog post (and video) will give you some pieces of advice as to what to choose between spot Forex vs futures that will tremendously help you in your trades.

Was this video on Spot Forex vs Futures Market Trading helpful to you? Leave a message in the COMMENTS section at the bottom of this page. 

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Breaking Down Our Spot Forex vs Futures Strategy

Welcome my friend to this video on spot forex vs futures currencies, spot forex trading, spot forex markets and a comparison between the two, some pluses and minuses; each have their own advantages and disadvantages. We’ll walk through the difference of spot forex vs futures today so you can make a decision on what’s best for you. But I find that there are some of these things that a lot of people don’t think about or maybe know about and you need to before you make a decision. So let’s go through some of those. First of all, let me give a side note. You can also trade currencies with exchange-traded funds and exchange-traded notes. The problem that I find with a lot of them is that the price action is a bit different and they have a lot of gaps in between the bars. Those are not technical gaps.

It’s just the way that the markets trade. So not real crazy about exchange-traded funds and notes. Even though they’re the really high volume ones surprisingly that I’ve seen for currencies. So I look at the spot forex on the left and then we’ve got the futures on the right. We’ll look at the euro today since that is such a high volume market and I also put the MACD down there in the bottom just so you can compare how the indicators would look as well as price action. Now, as you can see, I’ve got my global crosshairs on here, so we’ll just scroll over bar by bar real quick and you can see, by the way, this is a daily chart, well it gets some Internet stuff, too. But as you can see it’s pretty much the same right now.

Difference Between Forex and Futures

Not exactly, but very much the same from bar to bar. Not too much difference there. Indicator, looking pretty much the same. We’ll scroll forward here, again, go forward here so you can see in advance. So, like for example, this bar right here, you don’t get a spike top reversal bar what we call there, but it’s green and one red on the other, not a big difference. The overall price action is pretty much the same with very minor differences. Now, that’s not always true, but it is true most of the time. So let’s go down to a five-minute bar. Now, we’re looking at a five minute on the spot forex on the left and futures on the right. And as you can see, they are a bit different in here.

There are times when they will be different and the active trading times are pretty close to the same. You can trade either one of these 24 hours a day. So what are some of the big differences? All right, well first of all, even though they have generally the same price movement, but they will have a little difference, both trade 24/7, that’s number two. Now, those are similarities, but one of the big differences as number three where the futures are traded on a central exchange and the spot forex is not, and that does make a difference. In other words, people will tell you the spot forex has all this amazing volume, incredible volume. That is true, but you don’t have access to all that volume because you are not trading all throughout all of the exchanges around the world and through all the banks.

Spot Market vs Future Market – What You Need to Know

Therefore, you have the volume or the liquidity that’s made available to you by your broker. And that should be part of your consideration in choosing a forex broker as well as spot forex broker. Number two is that in general, although this has improved, the spot forex regulatory, standards, and brokers standards have not been nearly as good as that as for the futures market. Now, fortunately, we’ve seen a lot of changes in that, so that’s been good. But even here, as of late, we’ve seen a few problems with that. Keep that in mind as well. The leverage is better with the spot forex market than it is with a futures market in general, although that can vary. So one of the things that that means, well that’s a double-edged sword, right? Leverage can be a good thing. It can be a bad thing.

Basically, the more leverage you have, the more money you can potentially make with a smaller account. But on the flip side, the more money you can lose with smaller size account as well. So we’ve got to really take that into consideration, especially for beginning traders. However, I will say that the advantages of the spot forex market, especially for beginners, is that you are able to trade many lots (micro lots) and what that allows you to do is to trade with a smaller trading account. And that’s a good way after you’ve been learning trading and you’ve been paper trading, simulate trading, demo trading, whatever you’ve been doing. After you’ve got it down, good, you think your methods working, you’ve proven it to yourself in practice and you’re ready to start trading with real money.

Wrapping Up Our Spot Forex vs Futures Discussion

Well, if you trade the futures market, then you have to commit more money than you would in the spot forex market with a micro lot or many lot. So kind of cool that you can trade these platforms to market with less money to help you ease into the psychology of having to trade with real money. And I think that’s one of the advantages there.

One of the things that a lot of people don’t tell you is that at least here in the United States, is that there may be tax benefits to trading the futures market over against equities that would include exchange-traded funds or the spot forex market. So I am not a tax professional. I’m not giving you tax advice on that. I’m just saying that that’s a possibility and to talk to your CPA or a tax professional about that. This can potentially make a big difference at the end of the year as to how much money you actually end up putting in your pocket.

Rubber Band Trade Strategy

So if you found value in this video, spot forex vs futures, if you learned something new or something thought-provoking, please feel free to go ahead and share this video by clicking on the share button below. That’s really the best thing you can do to encourage me to continue to create more free tutorials for you. Also, subscribe to the Youtube Channel so that you can get notified everytime I release a new trading video. Click the thumbs up icon. And even leave the comment. I love your comments by the way, really enjoy those.

As a special offer to you, I’m giving you one of my favorite trade strategies. It’s called the rubber band trade that has a very high win-loss ratio. I’m going to give this to you absolutely free. This is a real trade strategy, I’ll teach it to you in 26 short minutes. Click on the image in the top right-hand corner of this video or in the description below the video. If you’re not watching on youtube, there’s probably a link below or an opt-in form in the side. Once you do that, I will personally email the video to you with the rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Spot Forex vs Futures Market Trading? Enter your answer in the COMMENTS section at the bottom of this page.

PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons.

FREE GIFT!

Also, I’m giving away one of my favorite trade strategies that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

Those interested in Spot Forex vs Futures Market Trading video that works in today’s markets also showed an interest in this video:
https://www.topdogtrading.com/swing-trading-stock-market-using-bollinger-bands/

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Top ETFs Trading – How to Find the Best Exchange Traded Funds

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ETF Trading Strategy
Top ETFs Trading - How to Find the Best Exchange Traded Funds , ETF Trading Strategy

Finding the top exchange traded funds to trade requires a sound ETF trading strategy. Given the quite complications in the analysis of this market instruments, a consistent, reliable, and top performing ETF trading strategy would be the game changer. However, coming up with such strategy requires a lot of experience in trading these trades. One best way to succeed in this is to stand on the shoulders of giants, right?

This blog post will teaching you my top ETF trading strategy I also personally use to gain profits and win in the stock market. I hope this works for you, too.

Was this video on Top ETFs Trading – How to Find the Best Exchange Traded Funds helpful to you? Leave a message in the COMMENTS section at the bottom of this page. 

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Breaking Down Our Top ETF Trading Strategy

Welcome to this video on finding the TOP ETF, that stands for exchange-traded funds. So ETFs trading is a little more challenging than most people first think and let’s dive into the detailed look of our ETF trading strategy and help you with your trading so that you can hopefully make more money.

What is an ETF

A lot of people think that exchange-traded funds are basically created equal. In other words, if you’re looking at the same sector today, we’re looking at the financials, so here are four different exchange-traded funds that are all tracking the financial sector and you would think, well, if they’re all tracking the financial sector, the point of an exchange-traded fund is that it’s basically an index of a bunch of different stocks in that same sector.

Therefore, all the exchange-traded funds from the various companies, whether it’s Spiders, Van Guard, Black Rock, First Dressed, Guggenheim, Invesco, Janet Hancock, Fidelity, they should all pretty much give the same results. Wrong, they do not! And that’s what this video is all about, to help you see, first of all, the difference and then how to determine which is the best one to trade for you at any given time.

The Premise

Let’s get into the basic premise of our ETF trading strategy and then I’ll show you how to evaluate this for yourself. We are going back 90 days. So this is about three months worth of price action and as you can see we’ve got a big disparity between these four.

So these four are, let me bring these up for you here real quick, actually going to go off the screen there, but the black one is XLF, that Spiders. And then numero dos, you’ve got the blue one and that’s the VFH, that’s the vanguard financial etf. The red one is IYF, and that is black rock. And then the green one is FXO, these are obviously the symbols that you would type in and that’s the first trust, and there’s many more we could have brought up Invesco, Janet, Ian Cock, Guggenheim, Fidelity, others; like I said that just for simplicity, if that will just look at for today.

So different companies that are providing these indexes that are tradable in very different results over the last 90 days. As you can see still we’ve got anywhere from about six point three percent all the way down to three point one to nine percent. So yeah, big difference, right? That matters about a 50 percent difference in your profits.

ETF Trading System

This is not little deal. This is a big deal. This you need to know. That’s why I’m pointing it out to you today in our ETF trading strategy. All right, so why is that? How can that happen when they’re all trading, they’re all tracking, I should say the same industry, the same sector. Well, there are several different reasons for that.

What You Need to Know

It is possible that certain funds are putting or tracking certain stocks and that of others. Another one would be waiting, so some funds will be evenly weighted with all the companies in that index. The same others will give a higher weighting to the higher caps, higher capitalized markets, and so that obviously will make a big difference as well. Another one is how often will they re-balance. So if they are going to say we’re going to evaluate this annually and re-balance the index as opposed to another company that says, well, we’re going to re-balance a recorder of that’s going to make a difference not only in performance but also in expenses and so forth.

And talking about expenses, if you’re trading these, you also need to look at some of the difference with regard to which are the most liquid, which have the most volume – this is especially important if your short term trading. Then you want something that’s very liquid and you also want to look at the bid ask spread, and the bid ask spread can vary quite a bit between some of the various exchange-traded funds out there. So look at that because those are expenses and then there’s an expense ratio as well that these companies chart, so the expense ratio can be quite different and I immediately looked at Vanguard in this ETF trading strategy because I expected them to be the cheapest and they were very low, point one percent net expense ratio, but it wasn’t the lowest. They were the second lowest.

Continuing Our Top ETF Trading Strategy

Then I’ll look to Power Shares. Power Shares are very popular and they had a point six percent net ratio, six times higher. Again, not a little deal, not a little deal that when I looked into it, I found out it was because that they turned over their portfolio more often again. Now how does that affect performance? That’s another thing. Maybe more turnover will actually improve the performance, but you’re paying for that more active hands-on management by their team. So it always out one thing, you can’t isolate one thing over against another. You need to put it all together. So, how do we put that all together? I put together a chart like this. Now, this is called the percentage change chart. So if you look over here on the right, you’ll see that there are no prices, just percentages.

So when you started, I started this particular one. Maybe they need to go over here. There’s a little yellow line there. I don’t know if he could see that very well. Anyway, that’s where it started. So they all started at the same spot. Zero Change, zero percent change because they’re all starting at no change on that day. Okay. So that is kind of our benchmark and we’re looking at which one performed the others and that will vary from time to time. We’ll just refer to the color lines here since we don’t involve the labels up right now. So you’ll see that right out of the bat, the black line performed the best and that’s great. That’s the Spider by the way. And then as it came down, but then the red one held up the best on a down market.

ETF Trading Strategy Recap

And that’s important because then you got to regain that money. And then the black one, you know, here we are now and you can see as we pointed out already, a 50 percent difference in the profits at the end of 90 days. But don’t forget about the draw downs too. That’s important. How much did you end up losing? Now, see the blue one here that lost more than five percent of the move down. Whereas the red one here only lost about three percent. So again, big percentage difference. Remember the difference between three percent or three percent down here at six percent is not three percent. It’s a 50 percent difference in your games. Very important to remember that. That’s how I do it. Use that percentage change chart. I look at this and I look for these markets to perform.

See which ones are under-performing, outperforming. And you can do this with anything. So I’m just doing the example with the exchange-traded funds, ETFsfor trading, define which are the top ETFs at any given time and as you can see it and we’ll change it will rotate so these things like expense ratios and a volume and all of that, they play a part in it, but the bottom line is what’s the performance? Because sometimes the more expensive one could actually help perform because they’re re-balancing and that might actually help the ultimate performance.

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