The type of ETF trading system that a person chooses is going to be a personal choice that will involve many variables. Depending on whether a person wants to invest in a software program, subscribe to a service, do the research on their own, or use a system that they come up with. There basically is no standard system that everyone uses when they trade.

The effectiveness of any trading system that one uses will depend a lot on the type of trading they are doing and the baskets they are trading in. A system that is geared for long positions will not do as well in a short position sector. So, a trader who is diversified in Leveraged or other types of risky ETFs will want to be able to adapt their system to meet the needs of the sector they are in.

ETF trading is affected by thousands and millions of tiny details that impact the market. There is no system that can effectively calculate all of the details and their impact on a particular day in the market. Therefore, a person will want to take the time to find a system that most closely meets their needs, then give it a tweak to make it their own. The systems that work for some people will not work for others. Besides the market the system must also meet the personality of the trader. A low risk system, even if it is effective, will not work for a person with a high risk personality.

A system that many beginners find effective and has a fairly low risk is the EMA system. Exponential Moving Average is a trending system that is done by following the trends of the sectors that one is trading in. TLT, SMH, RTH, XLF, and a few others are traded by many people using this system. It requires only that a person do their analytical and historical research to be effective.

Using the system, a trader will go long when the fast EMA crosses above the slow EMA and the short when the reverse occurs. A trader has to leave or reverse positions on the day after the fast and slow EMAs cross. After deciding the days for the EMA (usually about 15), a person must stick to them.

As easy as this system is a person will have to do the research on the sectors they are considering and follow their trends to make effective trades. Setting buy and sell limits will help to keep the trading on track.

A good rule of thumb is to set a risk allotment. Set the percentage of the total capital that one is willing to risk on any one position, then stick with it. When the account reaches the minimum don’t add more fuel, just move on. The other rule is to set the number of losing trades in a row that will be accepted, then cut back by a set percentage after that loss has been reached.

When choosing the ETF trading system that will be most effective it is important to gain as much knowledge as possible about the system. By using systems which have a history of consistent effectiveness a person will have a better opportunity to use and learn from the system as they get into more complex trading. Seeking the assistance of a professional who has expertise in ETF structure, trading, strategies, and methods will also be extremely helpful in developing a trading system that will be successful.

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