does anyone use index etf’s with stochastics to try and guage the direction of the markets?
I’m just wondering if this is possible, because I have entry and exit points figured out mostly, other then how the overall index will behave. Does anyone have any tips on looking at this…. I am in the process of seeing if long term stochastics compared to short term, (along with other indicators of the etf’s of the index’s like SPY, QQQ, etc. ) can tell where the market might be headed that day, or segment of the day….
Sure, but you’ll get a lot of false signals. It will play hell with your confidence.
Trading is trading, doesn’t matter whether it’s an ETF or futures or options or stocks or Forex or pork bellies.
The key is your entry. If you chase price when it’s running just because you got a signal and enter at an extended price right before the pullback, you’re going to get killed 70% of the time. This is true with any indicator or breakout or momentum move in price. Once you get the signal, wait for the pullback to the MA or fib of the move or previous support, and your risk is small. Most of the time price will move immediately in your favor and you can put a break-even stop on for a free ride – let it do what it wants, go take a break.
Using ETF’s you have a lot more room for error if you are unleveraged and can place stops further away. You might want to enter half your position on the signal, and the other half on a pullback.
Just as a side note, there is no one indicator or method or system or program or book or seminar, etc. that will make you successful. Lots of things work together.
Test you plan on a simulator before you risk your hard-earned money.
http://simulator.investopedia.com/
Powershares QQQ Trust Series 1 (ETF) For June 22 2010
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