ETF Trading - Fundamental or Technical Anaylsis?
HWhat is the difference between technical and fundamental analysis in ETF trading?
ETF (exchange traded fund) fundamental analysis tries to predict future prices based on supply, demand, interest rates, government policy, weather, underlying economic factors and a whole host of other criteria. It does tend to work, in part, if you are an economist and become extremely good at it. It will, however, never generate the types of returns you can achieve with technical analysis.
Technical analysis, on the other hand, takes advantage of the fact that ETFs move in trends 30% of the time. Technical analysis identifies these trends so you can take advantage of moving prices. In technical analysis, it doesn't matter what the reasons are behind price movement. Rather, it is the fact that prices are moving that is significant. Being able to identify trends in price movement is what you want to learn.
It is helpful if you can develop a system to be able to spot and predict these trends. If you do not have a current system that is time proven and successful, you can acquire this knowledge using an existing system.
Technical analysis assumes that prices reflect fundamentals already. For example, let's say that a hurricane is approaching the U.S. Gulf coast. Oil prices start to go up. Because of this new fundamental knowledge, the price already started moving up at the time the knowledge became available, not when the storm actually hit. So, you might be able to predict that the price will be affected, just not exactly when or by how much or in what pattern.
It's the same with any ETF. Assuming you can actually know everything there was to know that affected the price of an ETF, you could not possibly know when, by how much or in what variable pattern it would affect the movement of the price, which is the market's reaction to that information.
Let's say that somehow you had advance knowledge of all the fundamental information to be able to predict the eventual market crash in September and October 2008, you still would not know exactly when the crash would occur or how much it would crash. But with the right knowledge of technical analysis, you could have and would have been able to profit from the crash, regardless of its severity or pattern. Having a proven system can do that for you.
If your portfolio is stagnant or dropping, you may want to rethink your whole approach to the markets or at least diversify a portion to self trading. The beauty is you can gain the necessary knowledge and use a proven system that takes only 5-10 minutes every night, after the market closes.
The other thing is that, by learning and executing a proven ETF trading system, you can achieve returns of 3% a month within an IRA or 6% a month outside an IRA. All this while risking only 1% on every first trade and having very low draw downs.
If you're into day trading, you can magnify these returns even more.
In summary, fundamental analysis examines the reasons behind price movements and attempts to predict prices based on these reasons. Technical analysis is only concerned about the fact that there are movements in prices and attempts to predict those movements, whether they are up or down. It's in the movement of prices where profits are made. Find the best
ETF trading system
and you can start building significant wealth.
About the Author
http://www.etf-trades.com is your gateway to a proven succesful ETF trading system.
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