Swing trading ETFs
Exchanged traded funds, abbreviated as ETFs, are perfect for novice swing traders because of many reasons. For instance, they have abundant liquidity, a lower investment threshold, a smaller expense ratio, and numerous investment choices, just to name a few. However, like trading crypto or forex, swing trading ETFs also have several risks.
As a result, ETF swing traders must incorporate various strategies to enhance their ability to make profits. Also, there are over 1,600 ETFs that traders can trade on, making it difficult to identify the best ETFs for swing trading. Swing trading ETFs is a trading style used by traders who try to profit from a movement in ETF prices. ETF swing traders target medium-term price actions as they maintain their positions for a couple of days, weeks, or months.
Suppose you’re new or slightly experienced in ETF swing trading. In that case, this ETF trading guide will help you master several concepts regarding the subject. You will learn various strategies and critical things you should know when swing trading ETFs.
Top Brokers With ETFs for United States
What are ETFs?
Exchange-traded funds are securities that track a commodity, sector, index, or any other asset. Still, they can be sold or bought on stock exchange platforms like other regular stocks. ETFs can be tailored to trace anything from an individual commodity price to a diverse set of securities. Furthermore, they can be designed to track specific trading investment strategies.
How to Swing Trade ETFs
Understanding how to swing trade ETFs is the most essential thing for a swing trader. The following are crucial steps to follow when swing trading ETFs:
Select the Right ETF
Before you start trading ETFs, you must identify the best ETF for swing trading as it will determine the profitability of your trade. Good ETFs for swing trading are those with a relatively high volume and liquidity. This is because they enable swing traders to open and close trades with ease.
On the other hand, ETFs with low volume does not offer enough liquidity within a short time frame. This factor makes them unsuitable for swing traders because they hold trades for a limited period.
Also, it’s worth understanding that some sectors offer more liquidity than others. For example, technology-based ETFs have higher liquidity than material-based ETFs. Therefore, as an ETF swing trader, you should take your time to understand liquidity to enhance your ability to make the right ETF trading choices.
Other than liquidity and volume, ETF swing traders must analyze the ETF’s previous performance. This way, they gain insight into what to expect about that ETF.
Identify Suitable ETFs
Once you select the ETF you will swing trade, create a swing trade ETF list containing the most active ETFs that you might be interested in in the future. This way, you can identify potential future trades. So, how do you find these suitable swing trading ETFs?
Swing traders rely on technical analysis tools to forecast a powerful price movement in the coming days or weeks. Although these indicators are not 100% accurate, they provide critical insights into what ETF traders should expect in the future. ETF swing traders use technical indicators, like chart patterns, to identify potentially profitable ETFs.
Such chart patterns provide a visual representation of an ETF’s prices. As a result, they can forecast when its volatility might increase and by what magnitude.
ETF Swing Trading Strategies
For traders to swing trade ETFs effectively, they need to craft an explicit trading strategy. The following are some commonly used ETF swing trading strategies to optimize possible profit while minimizing risks involved.
The 50-Day Moving Average
This ETF swing trading strategy involves checking the price average of an ETF over the past 50 days. It often serves as the ETF’s resistance level in technical scrutiny. ETF swing traders use this strategy to spot trends, including bearish or bullish crossovers.
Such trends are beneficial if you’re searching for stock patterns. As a result, you can analyze which direction an ETF might take.
Sector Analysis
Swing trading sector ETFs are comparatively simple but quite efficient in identifying the best ETFs for swing trading. The following steps can help you incorporate the sector analysis swing trading strategy to find the best ETFs to trade.
1. Research Top Stock Sectors
You can use many approaches to identify the hottest stock industries in the market. Check out the trending stock industries on the trading platform, like IQ option or Robinhood. Remember these sectors keep on changing in performance. Failing to specify the period will give you general information rather than up-to-date information.
Alternatively, you can use stock screeners to identify top stock sectors. These screeners provide visual data about the latest top-performing industries.
2. Think of Potential Sectors that May Start Trending
This step involves identifying potential industries that may perform excellently in the coming days. It depends on your knowledge and experience in the industry, and you must understand what’s happening in the global market.
3. Narrow Down Your Swing Trading ETF Options
Upon listing top-performing industries, you should narrow down to two or three that you feel they’re viable choices for swing trading. Using stock screeners can help you identify the best-performing sectors of the shortlisted industries.
4. Identify the ETFs that Surround These Sectors
Once you’ve selected the sectors you will focus on, find the ETFs that encompass these industries. The quickest way to do it is by searching sector-specific EFTs on a trading platform like Robinhood. You can filter searches by industry name, say “automobile ETF list”. This way, you’ll find a list of ETFs for swing trading.
Analyze the list of ETFs and select ones that you will swing trade on depending on your experience and intuition. After deciding to swing trade a specific ETF, it’s time to select when to enter and exit the trade. Using analysis tools like candlestick charts is beneficial in predicting when price movements may occur.
Which is the Best ETF for Swing Trading?
Suppose you’re searching for a potentially profitable, high volume and liquid ETF. In that case, Vanguard is one of the best and most effective ETFs. Therefore, swing trading vanguard ETFs can be beneficial and less risky, making them suitable for beginners.
Can ETFs Beat the Market?
Swing trading multiple ETFs provides a diverse portfolio, allowing you to access top-performing stocks in the market and significant returns. At best, well-chosen swing trading ETFs can beat the market.
Can You Swing Trade ETFs?
Yes, you can swing trade ETFs. You only need to find a broker that offers ETF trading.
Can I make a Living Swing Trading ETFs?
Professional traders are swing trading ETFs for a living. So, it’s possible to swing trade ETFs for a living. However, it depends on your life demands. Also, you should assess whether it’s the right time to do it.
Are ETFs Better Than Stocks?
When deciding whether to swingtrade in stocks or purchase an ETF that exposes that sector, you should consider opportunities that minimize risks while generating returns that will beat the market. Therefore, between the two, none of them is better than the other in all situations. Instead, there are market conditions that favor ETFs over stocks.
For instance, when the stock returns in the industry have a limited dispersion around the average, ETFs would be the better choice. Also, if you’re unable to achieve gains through the company’s knowledge, ETFs would be more suitable in this case than stocks.
Final Thought
Swing trading ETFs should no longer stress you out. You need to clearly understand various factors that you should consider when selecting suitable stocks, including liquidity and volume. Also, you should utilize various technical analysis tools to identify the top-performing industries and select ETFs encompassing them. Finally, consider creating an ETF swing trading strategy based on your understanding of the industry and preferences. This way, you lay down a trading plan to guide you through your EFT swing trading activities.