Although I don’t advocate day trading leveraged ETFs as this breaks the first rule of my Rules for Using Leveraged ETFs, I’d be intellectually dishonest if I didn’t acknowledge that there are ways to use them in a day trading scenario.
For any day trading system to be taken seriously it must be based on some objective data that triggers a buy or sell. In this particular scenario I like using leveraged ETFs to maximize the direction of a market when the futures are moving 50 points or more in any given direction.
For example if the Dow Jones futures are up 50 points before the market opens I’m prepared to buy a leveraged Dow Jones or S&P 500 ETF that day. Conversely if the Dow Jones futures are down 50 points I’d reach for the inverse leveraged ETFs for the respective market index.
Now through back testing and actual application I have come to conclude that on almost any given day the first 60 minutes of market action provides desirable entry points for buying leveraged ETFs.
My favorite entry point for a leveraged ETF day trade is 1% below the opening price. The reason being that even on the most bullish of days markets rarely move straight up so if one is patient they can catch the market taking a break in the early opening minutes before rocketing up. This is when you may wish to buy.
Conversely my exit point would be at least 1% above my entry point. I would look for more gains if the futures were 100 points or more or if the market sentiment (ex: headlines) proved to be supportive of a higher move. In either case getting 1% is a must to have a successful trade.
When would I apply a strategy like this?
The time to use this strategy is when you have missed capitalizing on a longer trend in the market and are simply looking to make up ground, or you are a couple of points away from your target gain for the year. I target an annual 25% return so if I had an account 5 percentage points away from this number and was nearing the end of the year this would be a strategy I would consider.
For those of you out there who simply prefer day trading over holding leveraged ETFs overnight this strategy could be the only one you use to carefully craft a desired return in the 8 – 10% range free of the stress of a buy and hold position (leveraged or unleveraged). I say 8 – 10% because I assume you’ll get about 20 chances to execute this trade and you should be successful at least 50% of the time.
Putting it all together
Your trigger is a 50 point move in the Dow Jones futures (or similar gain percentage wise in the S&P 500 futures).
Your entry point is 1% below the opening price of the leveraged ETF.
Your exit point is 1% above the entry point.
Exceptions – you can target a higher gain if the futures are 100 points or more, but this is getting away from the sell discipline that keeps you out of trouble. Of course nothing ventured nothing gained and most day traders are pretty adventurous.
Leveraged ETFs are the Most Powerful Investments on Earth!
1) They help Young Professionals multiply daily returns and become millionaires.
2) They reduce investment risk for Baby Boomers by reducing the amount of capital and time invested in the market
3) They help Retirement Investors make up time by accelerating gains
They are quite frankly the greatest thing since sliced bread.
And they require expert handling. I am that expert.
If you are considering using leveraged ETFs I invite you to contact me, Maurice Wilson, via phone at 704-222-4162 or e-mail me at email@example.com
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DISCLAIMER: The information presented in this article is meant for informational and educational purposes only and is not be construed as invesment advice. Please contact your financial advisor before using this information in y0ur investment portfolio. At any given time Maurice Wilson or the advisors of Wilson Wealth Management Group, LLC may hold positions in the investments mentioned in this article and thus have a potential conflict of interest.