I do not understand the rational behind TA even after using it for many years, nevertheless it make sense to me, regardless of the underling instrument, including any ETF...anything Paraphrasing Gertrude Stein: " A chart is a chart is a chart is a chart..."
Let's view this from an Investor stand- using TA on ETF's is no different than using TA on Mutual Funds- or individual stocks for that matter- TA can effectively reduce Risk and exit /enter positions is the take-away vs a Buy and Hold position- The question is- can one establish a set of well defined exit and entry criteria to take advantage of the market swings- to their advantage- and replicated over the successive swings in following years using some absolute set of parameters- Exit when the 10 crosses the 50 down- Exit at 8% , Enter when the 50 upcrosses the 200 etc. One can choose some absolute "take action" - or one can sit and take what the market gives.... I think ETF's offer an exceptional opportunity for Investors seeking to trade or invest a liquid investment that gives a larger market exposure (eliminates single stock risk) . ETF's have a large following- compared to actively managed Funds -Mutual funds- have very low expense ratios- and that lower cost ETF often makes it a better investment over the long term. Can one tactically swing trade an ETF holding and sell near highs and buy more for less at downturns? Potentially, one could try to focus on a narrowed universe/ selection of ETF's and try to be a tactical swing trader and time the market-. One could also employ professional strategies such as Monthly or quarterly rebalancing of the diversified portfolio with an eye to the longer term portfolio. This usually requires a larger account willing to hold 10-20 positions in varying % . (See Ivy League Portfolio by Faber) or David Swenson- Typically, an actively managed portfolio in a mutual fund has charged an investor an entry commission - up to 5.75% and then charges a 1-2.55 annual expense cost for managing the fund- The majority of most funds underperform the passive index they are benchmarked against. Typically, a market timer fails because they sell at the low in market declines and get back in higher- losing the spread cost of exit to reentry- and they repeat this cycle ( I've done this myself time after time) . The ideal way to "time" the market- would be to exit during an overextended peak and reenter just as a decline reached bottom. So, you sell when the market rallies 10% thinking it's a top- and it goes on higher and higher and you get back in- just when it decides to go flat and decline- Market Bias and fears cloud an objective approach- I know- my glasses are still fogged up- Fortunately , I have both an Investment account, and totally separate trading accounts- I am a better Investor than Trader- I sadly admit. My purpose in posting in this thread is that perhaps i can give a warning that just because we have been uptrending for 5 years + - does not mean that is what will occur over the next 5 years- What seems simple and obvious may change in the future in ways and % most have not experienced. Investing in a diversified ETF portfolio gives one an edge above the individual stock trader that holds 5-10 positions- and has way too much Risk. ETF's are comprised of many underlying companies and do not have large declines based on a single company failing to make earnings. ETF's are generally unmanaged and follow a predetermined index or group of stocks/sectors. My Opinion is that one should have a substantial diversified retirement account funded before trying a trading account as the source of one's future gains- A trading account should be inititated with monies one is prepared to put at risk of greater loss -perhaps entirely. One final note- Costs of transactions play an important role- If you are a longer term investor/swing trader- making occaisional moves or trades- making them without any commission cost just makes business sense- TD Ameritrade offers some 100 etf's with no commissions as long as you hold them for 30 days? Vanguard Funds- has Many - No load- very low expense ETF's that can be exchanged at no cost- no commission. Very few actively managed funds that you pay a expense to enter and a high expense management fee fail to match the return of the passive Vanguard low cost index appropriate to that position. Over the long run, cutting expenses results in greater revenues for business- consider your long term investments as your core business and treat them such- Take the time to do the analysis for yourself- If your timing approach to the markets is not a success- choose something as simple as a Target Fund from Vanguard for a low cost solution. Just simply "Invest" in an appropriate Target Fund from Vanguard- contribute regularly- and substantially early in life- and retire wealthy - and ignore minor fluctuations in the market- they are just a minor blip over a decade or two. - Guidelines would be- Have a solid Investment account as #1 for the very long term Be diversified- Do not be too overweight in present trending market area Rebalance as a tool professionals employ- meaning they take some off the winners and buy the losers- sounds like a value approach -does it not? Invest first- trade second- properly evaluate your process- Since 2009 - stocks/ have been generally uptrending in the wider markets- Most traders will look at too tight a time frame - (Daily) and react to it- failing to view the larger in trend play (weekly). For ETF traders -looking to gain long term positioning- read the "IVY PORTFOLIO " by Faber- And David Swenson- on Pot construction- And if it is too much bother- select Target Funds- Vanguard.com and buy into the fund that is automatically and professionally rebalanced at a very minimal cost ratio- You can thank me in 20 years you took that approach vs the more exciting trading approach!!!!. SD
For TA to make sense, it means that there are idiots that take the other side. Are there any? if there aren't any, then those using TA are the idiots that take the other side.