Does this strategy make any sense?

Discussion in 'ETFs' started by nbseer, Aug 7, 2010.

  1. nbseer

    nbseer

    I'm not a trader, just been lurking on these boards.

    Would this work:

    Every morning shortly after the market open, buy equal amounts of TNA and TZA with very tight stops. On some days without big moves in the market, you might get stopped out on both for small losses. But on days with big moves, you would ride a profit in one for a big gain while getting stopped out for a small loss in the other.
     
  2. Retief

    Retief

  3. piezoe

    piezoe

    You could back test and see, but My gut feeling is that you won't find a place to put your stops that yields a profit over the long haul. Tight stops will have a high probability of both stops being taken out and wide stops will preclude making much money even on trending days. One thing you can count on though without even back testing is that this scheme will be very popular with your broker. For this to work out well I would think you will need an edge of some kind.
     
  4. babe714

    babe714

  5. Retief

    Retief

  6. David70

    David70

    I agree
     
  7. It would be a question of taking stats to see if this approach would work. Are you saying that if TNA and TZA move, say, 1%, they'll probably keep going another 0.5% or so, or some set of figures like that? That's something that could be back and forward tested. Merely placing stops does nothing to guarantee that the winning etf keeps going. I think if you were going to trade this way, it would be crucial to place some kind of take-profit order, otherwise, you're just asking for a net loss as the winner pulls back.

    Your thoughts, please....

    By the way, some of the other funds tend to zip ahead better than TNA/TZA, generating even more abrupt and violent price spikes. SOXL and SOXS move like hell quite often, sometimes leaping by several percent over a few ticks. DRN is no slouch either.