ETF Trading rUles

Disclosure: We're managing this portfolio in a simulated trading account. None of the trading activity is meant to be construed financial advice.  This is purely a demonstration of Chaikin Analytics investment modeling software.  We're not licensed to give any financial advice. With any investing strategy, there is a risk of catastrophic losses in unfavorable market conditions. ​
Goal :Trade ETF's and beat the performance of the ACWI World Stock Index over the course of the year, while preserving capital in down markets.

Strategy:  Relative Strength drives portfolio allocations.  For the US portion of the portfolio and where available, we use Chaikin Analytics ETF Power Gauges to forecast future relative strength in stock ETF's while using past price performance to break ties between closely rated ETF's.  

We'll  manage sections of the portfolio in alternating weeks - US Sector and Subsector ETF's in Week 1 and odd weeks thereafter,  Ex-US Stocks and Macro-Economic ETF's in Week 2 and even weeks thereafter. We’ll liquidate underperforming assets on Thursday of each trading week and add replacement assets on Friday of each trading week. 

Market Assessment : We determine the  Intermediate - long term trend of US and World Markets.  This is a bullish strategy, so we initiate new stock trades at full risk allocations ONLY when the broad index and constituent ETF's are in bullish conditions.   

Determine Portfolio Risk Based on ACWI Trend
  • 10 Week EMA > 40 Week EMA and 10 Day EMA > 40 Day EMA - Up to 75% ETF / 25% Cash
  • 10 Week EMA > 40 Week EMA or 10 Day EMA > 40 Day EMA -  Up to 50% ETF / 50% Cash
  • 10 Week EMA < 40 Week EMA and 10 Day EMA < 40 Day EMA -  25% ETF / 75% Cash

We're starting with a total Portfolio Net Liquidating Value of $500,000 in a margin account on November 8, 2014.  (Paper Money)

ODD Weeks - Trade US Sector and Subsector ETF's - Entry Rules

  • Use the ETF comparison tool in Chaikin Analytics and rank Sector and Subsector ETF's according to 6 month % returns, from highest to lowest.  Our goal is to pick the three strongest sector ETF's and the three strongest sub-sector ETF's..
  • ETF must deliver better performance than the ACWI over the last 3 and 6 month periods.
  • Make sure each of the top 3 ranked ETF's is in an uptrend first by confirming 10 Week EMA > 40 Week EMA for any ETF under consideration.  ETF must be up-trending on at least an intermediate term basis.
  • But if the ETF is recovering from a downtrend, we can consider it if 10 Day EMA > 40 Day EMA & price is making higher highs and higher lows on an intermediate basis.  If ETF has broken an intermediate 3 - 6 month trend support level, we do not trade that ETF. 
  • Chaikin Analytics filter - Sector and Subsector ETF's must be Neutral Plus rated or greater.   
  • Very Bullish or Bullish  ETF Power Gauge ratings are the first level tie-breaker if the difference in 6 month return % is less than 1%
  • The 3 month return percentage is the second level tie breaker if the 6 mo ETF % return rank difference is less than 1% and both ETF's have similar PG rating.  
  • Once rank has been determined and ties have been broken, then we invest in up to three 2% tranches of Net Liq - one for each qualifying sector/subsector ETF, up to the allocation limit for each sector and subsector ETF(allocation rules to be discussed below).   

Allocation Rules

  • Allocation limit for each sector and subsector is up to 2x the % composition to the ACWI.  Example:  Financials make up 18% of the ACWI, therefore, our sector allocation limit is 36%

Even Weeks - Trade Tier 1 and 2 Country & Macro ETF's

  • Trade Top 3 Tier 1 and 2 Country ETF's according to the same rules used for US sector and sub-sector ETF's. 

Services

Service One

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Detail One

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Detail Two

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Detail Three

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