Not a Theory... A ETF/Stock Trading Strategy You Can Actually Use Today!

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ETF Portfolio Asset Allocation

allocation of Exchange Traded Funds (ETFs)

ETF - asset allocation
click here for a detailed description of Exchange Traded Funds

Exchange Traded Funds (ETFs)

etf description

Investment - Long Position
70-80% of Total Portfolio.
Non-leveraged ETFs only.
Buy, hold and manage equities.
Use 3% stop order to raise cash - 1/2 of holdings
Use 7% Stop Order - major market down turn.

Swing Trade
20-30% of Total Portfolio.
Leveraged ETFs only.
Hold 3-8 days.
Use tight 3% Stop Loss Exit.

Roll-over the ETF symbol for details MDY , QQQQ , VTI , VWO , EEM , SSO , QLD , SH.

The above allocations are my preferred guidelines, you may change the allocation depending on your appetite for risk. Just keep in mind that the aggressive allocation has a lot more risk then a conservative allocation. Also please note that the lower the value of the account the fewer number of ETFs it would hold.

Special note for accounts above $80,000 - For my large account, I use the same trading and investment strategy. However, my allocation differs as follows; The first 5 ETFs are allocated as shown above which become my core positions. Any additional long position (ETF) can be selected from a number of different sectors. Profiles and performance can be reviewed at this website:
http://news.morningstar.com/etf/Lists/ETFReturns.html.
I do suggest not to exceed more than 8 ETFs for any portfolio. The number of ETFs for swing trades remains the same for large portfolios.

Brokerage Account: I suggest, you open a separate account just for speculation. You can track easily your trading skills and monitor your portfolio's performance.

Questions & Answers

How to buy equity positions? I like to buy equity positions in 2 increments or more, provided each purchase is at least $2,000.

When to buy inverse ( "short") ETF? I buy the inverse ETF after it has crossed the moving average. For example, the market is in a down trend and I want to protect some or all of my long positions. Again don't use it to hit a home run - use inverse ETFs responsibly.

When to use leveraged ETFs? I use leveraged ETFs for swing trades only. Buying a leveraged ETF at an inopportune time can set your portfolio back real quick. Timing is a key component for investing in general, and investing in leveraged ETFs in particular. I don't buy leveraged ETFs when the market goes through a consolidation or sideways, because it's difficult to spot a sustained market direction. Leveraged ETS gain twice as fast but also lose twice as fast.

"You only have to do a very few things right in your life so long as you don't do too many things wrong."
-Warren Buffett

"When reward is at its pinnacle, risk is near at hand."
-John Bogle

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