For many of us who choose to trade ETF's, we realize there are many options or ETF vehicles that can used to trade a particular market. I tend to follow and trade the Standard and Poor 500, but that does not mean I am stuck with SPY as my only choice. The Russell 1000, 2000, and 3000 follow closely, but will lag or lead depending on the market. Certain sectors may outproduce another sector such as financials or energy. Additionally higher beta options or leveraged ETF's exist including inverse volatility and 2x or 3x products. 

Personally, I swing trade through my Roth IRA. No taxes = no problems, right? Well, yes on the taxes, but... Laws state that IRA's cannot operate on margin, so you have to be a little creative. You can use options, but that adds whole new dynamics of the greek parameters and heavy time decay. I personally prefer the 3x leveraged ETF products, UPRO, TNA, SPXL, FAS as well as inverse volatility XIV for Bull, and for Bear I prefer SPXU, TZA, SPXS, FAZ. Notice I did not include VXX in that list. I personally feel it is broken and grossly underperforms.

At any rate when entering a long or short trade, simply comparing daily RSI, ordering your choices from highest to lowest, is a generally reliable method for picking the strongest performers.

Today for example:
TNA: 38 (least)
SPXL: 38.5
UPRO: 39
FAS: 45
XIV: 45 (greatest)

If they market were to pull a 3-5 day rally, this should be the order of profitability (more or less) and that should seem plausible based on the most recent bull runs.

Now here is the thing: If the market does not cooperate, the opposite will be true. So, if you go Bull and the market goes Bear, you will more likely bear a greater loss than the other ETF's. 

Matt
10/28/2012

Hey good stuff here Bryan, I'm new to TA and found the articles from 10/26 and 10/27 to be helpful in describing, from a TA standpoint, your current assessment of the market.

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Bryan Gebhart
10/28/2012

Thanks Matt, much appreciated. Will be posting more soon.

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Matt
10/31/2012

Hey Bryan, what TA indicators have you found most accurate on a 3day-1 month timeframe?

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11/1/2012

To be specific, you can/would use two different methods. One method follows or times the market entry / exit (which would be based on swing entries and exits as opposed to concrete time periods), and the second, which is to determine the best ETF to use. You can easily use the strategy above for picking a trading vehicle, but do it on a scale that is relative to your anticipated trading time. If you want to do it monthly, look at monthly and weekly charts, and compare RSI. If you want to get in and out weekly, use a weekly and daily basis and do the same.

For timing the entrance / exit for weekly swings, I use and recommend weekly and daily charts, with Bollinger Bands set up at [20,1] and [20,2], RSI [14], STO [12,3,5], MACD [12,26,9] and occasionally an Elliot Wave Oscillator. I am still learning Elliot Wave theory so I want to get a little better before I advocate how to use that, and always have your macro fibonacci lines.

That actually brings up a good subject, and I will post a article / blog on drawing fib lines. There are long term ones with sub-fib lines and short terms from recent moves, and both are good to use.

Matt
11/4/2012

Thanks for the response and specifically, thanks for providing the periods/criteria next to each indicator. After reading your article, I started to study up on RSI, and something that confused me was how alot of the supporting charts in the articles I read used periods ranging from 10-14-20, but it was never mentioned what criterion was used to choose a period. How do you determine the periods to use? Any input there?

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Bryan Gebhart
11/4/2012

I am probably not the most experienced person on other than RSI(14). That seems to be the standard, so that is what I use. RSI(10) would have less delay in producing a "signal", but lacks the accuracy as it does not have the data points that 14 units would. RSI(20) would have greater smoothing, but may lag in response and would not trigger a "signal" every time that the RSI(14) would.

The best advice I can offer is to play around with it and back test several options on various indices and choice stocks. See how it performed and if you can get an accurate and consistent reading from a different set-up. For me, I just stick with RSI(14) for weekly, daily, hourly, etc. as I am used to it, and know more or less what to expect from it.

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