ETF Swing Trading Trade Results – Not a Good Trade!

ETF Swing Trading Trade Results – Not a Good Trade!

August 19, 2018 0 By Jeremy


ETF Swing Trading Trade Results Update

I have recently started trading an ETF Swing Trading system that I adapted from a few different pieces of research.  In this post, I wanted to highlight one of the recent trades that I made.

This trade did not work.  But that is ok because it is part of a larger system.

What is the ETF Swing Trading System?

The system I have created is a mean reversion system.  It looks for pullbacks in ETFs that are in longer term uptrends in order to capture quick profits.

Here is the objective of the ETF Swing Trade system:

To identify oversold opportunities with ETFs to capture quick profits as prices revert back to the mean.

This system uses the Wilder’s RSI indicator as its base in order to identify oversold ETFs that are primed for a rebound (in theory anyway).

You can read more about the system in this earlier post on the blog, but in the meantime here is a reminder of what the trading rules are:

  1. ETF traded must be in an uptrend: must be trading above its 200 day simple moving average and has been heading higher over the past 50 days.
  2. ETF traded must be in an uptrend: must be trading above its 50 day simple moving average and has been heading higher over the past 30 days.
  3. The ETF must trade at least 250,000 shares per day.
  4. The 2-period Wilder’s RSI [RSI(2)] of the ETF closes below 5.
  5. Set position size as 1% of account equity and 3 * ATR(20).
  6. Set abort stop at appropriate support level.
  7. Buy the ETF at the open on the next day.
  8. Hold the ETF until the [RSI(2)] closes above 90.
  9. If the ETF is above the 8 day simple moving average after RSI(2) closes above 90, continue to hold.
  10. Exit at the open following a previous day close below the 8 day simple moving average.

This scan is run in TC2000 every night and if there any ETFs that pass the screen then I review them and place a trade at the open the next morning.

A Quick, but Unprofitable Trade

On Friday, August 10, 2018 VT (Vanguard Total World Stock ETF) was identified through the scan.  There were issues with Turkey, a trade war, and some other stuff with China as well (not that it matters – I only trade the price not the news!).

VT dropped down and the RSI(2) was under 5, and all other criteria was met.  As a result, I set my stop and entered the trade that evening with my broker for a buy at the open.  Here is what the chart showed me.  As you can see, VT had a pretty big gap down and the RSI(2) was under 5.

VT ETF Swing Trading Scan Results - August 2018

When Monday came around, my broker bought at the open and I was in.  That was a bad day for global stocks and the market, and VT headed lower.  It didn’t hit my stop (my stop was based on the rules above), so I stayed in.

Next day was better, but the day after that was another bad day and my stop was hit and I was out.  Here is what the next few days looked like:

VT ETF Swing Trading Scan Results 2 - August 2018

As you can also see, as I look at the ticker today it is up nicely.  However, hindsight is always 20/20.  I stuck to the rules; this time it didn’t work but I had the right behavior.

I actually anticipate that this strategy will only be profitable ~50-60% of the time.  The power is that when right, the profits should far outweigh the losses.

What I learned

  1. That recent pullback in July was cause for concern as based on the chart there was still lots of room to head lower before the price hit support.  I need to watch for this – the ETF should be in a strong uptrend.
  2. Indications of this was that the 50 day moving average was not in an uptrend.  That should have been a red flag.  I actually want to see that the 50 day moving average is heading up as well, so I am going to add that to the scan.
  3. VT was very close to the 200 day moving average.  It did close above it which met the rules, but it was close.  However, the rules are it needs to be above, so I kept discretion out and took the trade.  That was still the right call as I trade the rules, not my gut.
  4. I think I could have done better on the stop.  I am going to do more research to identify appropriate stop levels for all trades.

I have now moved on from this trade, learned from it, and will be on to the next one.  As I write this I am also in a RSP ETF Swing Trading buy which is working out better!

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