Exchange-traded funds (ETFs) are the hottest trading vehicles around. Whether it is old-standbys like the S&P 500 SPDR ETF ( SPY | Quote | Chart | News | PowerRating) or the more 21st century, leveraged models like the Direxion Daily Financial Bull 3x Shares ETF ( FAS | Quote | Chart | News | PowerRating), there's no denying that the ETF market is becoming the "place to be".
But too many traders - especially those looking to trade ETFs in the short-term - arrive at the ETF market with more inspiration than effective, quantified trading strategies that has worked in both bull markets and bear markets.
This is where our ETF PowerRatings come in.
Our ETF PowerRatings are a proprietary ETF rating system developed specifically for short term ETF traders. Based on the research and strategies of high probability ETF trading, ETF PowerRatings make it easier than ever for the average short term trader to successfully and consistently trade exchange-traded funds.
Click here to launch your free trial to our ETF PowerRatings.
A recent pullback in the S&P 500 SPDR ETF or SPY resulted in an ETF PowerRatings upgrade to 10 and a short-term rally of more than 2% over the next few days.
We tested over a hundred, widely-traded exchange-traded funds since 2003, backtests that involved thousands of simulated ETF trades. As a result of that research, we were able to rate ETFs on a scale of 1 to 10. The highest rated ETFs, those with ETF PowerRatings of 8, 9 or 10 have historically produced strong short term gains more than 77% of the time. These are the ETFs that short term traders should be on the look out for when markets pullback and the "fear of falling" helps turn average ETFs into often incredible bargains.
Top 10 ETF PowerRatings in late October and again in early November helped signal a high probability trading opportunity in the iShares S&P North American Technology Semiconductor Index Fund ETF ( IGW | Quote | Chart | News | PowerRating).
At the other end of the scale, we have the low-rated ETFS - those with ETF PowerRatings of 1 or 2. These ETFs have made significant short term gains less than 24% of the time in our testing. For short term ETF traders looking to make ETFs a part of their short term trading strategy, those ETFs that have earned ETF PowerRatings of 1 or 2 are ETFs to avoid â€" or to sell short.
Trading ETFs with ETF PowerRatings may be the most straightforward, quantified approach to trading exchange-traded funds yet. A trading strategy of buying the 8s â€" or even better - the 9s and 10s - and then exiting these high-rated ETFs as they recover and begin to move higher, can be an excellent way to take advantage of market volatility whether the markets are climbing or collapsing.
Find out more about what ETF PowerRatings can do for you and your trading. Click here to launch your free, 7-day trial to our ETF PowerRatings today.
David Penn is Editor in Chief at TradingMarkets.com.
