What Is An ETF?  Which Ones Do We Trade?

What are Exchange Traded Funds (ETFs)?                                  What We Trade »

A select group of ETFs make the perfect instruments for trading with the LogicTiming system.  But what is an ETF?  Put simply, it is a basket of securities that trades as easily as an individual stock.  Place a single buy or sell order with your broker and the entire collection trades, but you only pay brokerage commission once.  Like a mutual fund, ETFs can have the added safety of built-in diversification because they are not a single stock but a collection of many quality securities.  Unlike mutual funds, ETFs can be bought or sold any time the market is open and they can be shorted too.

Typically ETFs are designed to match a common market index, like the NASDAQ 100, the Russell 2000, the S&P 500, the S&P Midcap 400, and others.  Or, they can be designed to match an industry sector such as semiconductors, networking, etc.  Or, they can involve more complex strategies.  But here at LogicTiming, we're only interested in the straightforward ones.

Though relatively new, the popularity of ETFs is enormous and growing more so every day.  Hundreds are currently available, but we only recommend a few...

Primary ETF Suggestions:

• QQQQ     PowerShares QQQ  (NASDAQ-100 Index)
• MDY        SPDR S&P Midcap 400 Index
• IWM        iShares Russell 2000 Index  (small caps)

Additional ETF Suggestions With Important Caveats:

• EFA         iShares MSCI EAFE Index  (Europe, Australasia, and the Far East)
• VXF        Vanguard Extended Market  (low liquidity proxy for MDY-IWM blend)¹
• IGN         iShares Networking Index  (volatile sector and low liquidity)²

View Chart Roundup for the summary performance achieved with the above ETFs.

Other Tradable ETFs For Your Consideration:

• SPY        SPDR Trust Series 1  (S&P 500 Index)
• DIA         Diamonds Trust Series 1  (Dow Jones Industrial Average)
• VTI          Vanguard Total U.S. Stock Market  (Wilshire 5000 Index)
• QLD       ProShares Ultra QQQ - Double the NASDAQ-100 Index²
• PSQ       ProShares Short QQQ - Inverse of the NASDAQ-100 Index³
• MVV        ProShares Ultra MidCap400 - Double of S&P MidCap 400 Index²
• MYY        ProShares Short MidCap400 - Inverse of S&P MidCap 400 Index³

Trade any of these ETFs, guided by the same LogicTiming signal.  Each can be traded long-only (for the more risk averse trader) or long-and-short.  Be aware that a blended portfolio (two or more ETFs) tends to be less volatile across varying market conditions.

¹For higher risk-tolerant traders only.  (Higher risk implies greater reward variability.)

²For advanced or professional traders only.

³Inverse fund ETFs must be bought (Buy) on a LogicTiming Sell signal.  May be useful as an alternative to direct shorting.  Check with your broker for restrictions.

Additional information can be found at the Securities and Exchange Commission for investor information;  and also at the American Stock Exchange.