ETF Trading Systems

Most trading systems are utilized in trading commodity futures. Much of the advanced technical analysis work is and has been happening in the futures arena. To start this project we are not going to reinvent the wheel.

We will be borrowing from some of the best known and most successful futures trend following systems,  adapting them to trading Exchange Traded Funds (ETF’s). Exchange Traded Funds (ETF) provide an excellent array of asset classes allowing diversification across asset classes.

ETF’s are generally less volatile and require a good deal more cash to be invested  than futures.  The futures trading systems enjoy a great deal higher leverage and the ability to utilize income producing treasury bills for margin.  Therefore these systems must be adjusted to fit, if possible the new requirements.

It is said that a trader must design his own system for it to be affective, i.e. for the individual to have the faith and understand what is going on.  The objective of this section is to provide different trading systems and signals for your perusal.  We encourage our members to add or delete requirements for each system to make them their own.  We also encourage members to consider combining systems to accumulate positions over time, i.e. buy half and then another half.

This section is and will continue to be a work in progress!

Below each system is an equity graph utilizing ETFs representing affective asset allocation:  Equity (Large Cap U.S.), Equity (Large Cap x- U.S.), Commodity, Bonds, Real Estate, & Currencies. Your selections may be different, but in this authors humble opinion, the diversification is necessary for one simple reason - No One Knows what the Future holds – No One! The equity represents long only positions, simply because in my 40+ years in this business dealing with John Q, despite the lip service given, most will not sell short.

Equity Charts are based on an original $100,000 portfolio.  Portfolio allocation is 8.33% in each of 12 ETFs, cash account only, i.e. no margin is assumed. If you trade utilizing margin adjust graphs and results accordingly.  Dividends and Interest received from the various ETFs during holding periods is not considered.  These will hopefully be updated each month.

There is no perfect system or methodology for everyone.  It is strongly suggested you begin here and build your own methodology.  Borrow, change, update, feel comfortable.

Results from 1/1/07 through 3/30/12 -> A diversified portfolio of 12 ETFs, two in each of 6 asset classes. Long Trades Only, Cash Account, i.e. no leverage (adjust for any leverage you might use).  Dividends and Interest received are not considered for this analysis, they will however, improve the performance you see.

Draw down graphs are shown simply because if you are going to trade any system, you must assume you will start at a peak in the performance. Therefore the draw downs are extremely important – Be honest with yourself; can you go through a 50% draw down and continue? Ed Seykota calls the compounded annual return divided by the maximum draw down his BLISS factor. Do not kid yourself with these big performance numbers some use, it can be very misleading.  Also below because one system or method is outperforming another does not mean it will do so in the future.

Detailed Performance Stats: Includes Equity and Draw down graphs, Profit Tables and Profit Distributions, and complete Trade Lists. In .pdf format.

Past Performance is not necessarily indicative of future performance.

  • M.A.T. System - This is a very long term oriented system and as such has had signals on only four of our 12 ETFs.  I may have to continue to watch this until we get more trades to give a fair analysis.

Member Discussions:

Any member interested in a complete Trade List, so as to verify for yourself,  just send an email, the system you’re interested in, and I will gladly forward you the list.

We continue to work on more ideas and will live test another system when ready.