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Keeping stops small while avoiding 'shake-outs' on pullbacks is a problem that active traders face when trading ETFs. Using specific support and resistance "target zones" can help with this.
One of the best ways traders can achieve this is to study a 5-day chart with 15-minute candles to spot major support and resistance "target zones".
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Managing Risk When Trading ETF Day and Swing Trades: How It Works
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There's nothing quite so anxiety-producing as entering a new ETF trade and have it go immediately against you. Whether you're a swing or a day trader, it's essential to have a well developed risk management trading plan in place, with protective stops, every time you trade.
Setting initial hard stop-out levels at 2-day lows is one strategy an active trader can employ, to keep losses small. Starting off the initial position with small share size, then scaling into it only if it continues, is an effective risk management strategy.
But what about ETF swing trades? (those from 2 days to several weeks). One tactic is to look at the SPY and QQQQ daily, to decide upon major support/resistance levels that you'll be using. See the video below for examples of how this works.
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There's two types of big losses that we as traders need to work to avoid:
1) Being wrong on large size, adding to losing positions, then taking stops (at what often is a pivot point, frustratingly enough).
or
2) Taking a "death of a thousand cuts" with dozens of moderate stop outs that add up to large losses, in a short timeframe.
Either error can be deadly to your trading account; one strategy is to be patient enough for strong breakouts (or pivots) to occur, and to avoid trading inside the middle 1/3 of a day's trading range in whatever ETF you are trading for that day.
Another tip to avoid big losses: look at the 5-day exchange-traded fund candle chart and only add to (or initiate new) positions once the trend is breaking outside of the 5-day range. Trades entered inside the 5-day range should be avoided, or initiated with small share size, as those are riskier.
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Watch as our trader explains how to set stops and manage risk when making swing and day trades in exchange-traded funds. Cost: FREE |
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(coming soon)
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in the newsletter box on the main page — best wishes for ETF success! |
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Disclaimer: Site visitors are advised that active trading is a high-risk, speculative activity and that generally expected customer results are that all traders will incur trading losses, regardless of the training they may receive and will not become profitable. No profitability nor performance claims of any kind are being made. We are not an investment advisor, financial planner or registered broker. We provide educational services for active traders. You accept all liability resulting from your trading decisions. No offers to buy nor sell any security are being made on this site. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site and no overall nor specific performance nor profitability claims of any kind are being made, nor should be inferred. Traders agree to not make actual trades based on the information contained herein, since all content is published for educational use only, and is not to be construed as trading recommendations nor advice. No individual advice nor trading management services of any kind are provided, therefore no member nor subscriber should assume that their participation in the services provided herein serves, nor is suitable as, a substitute for ongoing individual personalized investment advice from an investment professional chosen by the member/subscriber. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
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