ETF Day Trading Plan : NobleTrading Blog

Monday, July 20, 2009

ETF Day Trading Plan

Day trading exchange traded funds (ETFs) can be less risky than day trading stocks but can also offer less reward. For more insights read "Are ETFs good for day trading?" Day trading of ETFs demands a sound trading plan. Below are certain points to be considered when developing your day trading plan.

Trends: ETF prices move in the same direction as the stocks/index being tracked. A day trader should consider long-term, intermediate and short-term trends prevailing in the market. Moving average indicators, swing trade open positions, candlestick patterns and investor sentiments can be handy indicators.
Support and resistance: Finding supports and resistance levels according to changing market trends is very important. Fibonacci, Gann tools and other short term indicators can help in this.
Overseas market performances: Performances of Asian and European markets can be indicators of next day US market performances, at least for opening hours.
Reacting to News: Success with day trading highly depends on how quickly you react to market news and reports.
Gaps: Gaps are excellent indicators for taking positions at early market sessions.
Position sizing: Often how much you can make from the market depends on how much you can risk. An ETF day trader should have good position sizing strategy with regard to his account size and risk tolerance, ETFs traded and market volatility.