Trading ETFs: Gaining an Edge with Technical Analysis


  • Pages: 204
  • Format: PDF
  • Published Date: 2012


Trading ETFs offers an updated version of the definitive guide to this vital part of the capital markets. It contains numerous new examples of the techniques that author Deron Wagner uses in selecting the most timely ETFs to trade and underscores the core insights of his trading discipline “trade what you see, not what you think.”

Author’s Introduction:

Unlike most books on exchange-traded funds (ETFs), this one offers you strategies based on technical analysis, not fundamental analysis. When I began trading professionally in 1999, before ETFs took the market by storm, people tried to convince me of the merits of studying fundamental factors, such as price-to-earnings (P/E) ratios, balance sheets, earnings growth, and news events.

I’ve always believed that a deep knowledge of these items is theoretically important, but fundamentals seem to have a direct impact only on the long-term direction of a stock. In the short to intermediate term, the correlation between the actual price action of an ETF and its fundamentals is rarely signifi cant. Technical analysis, however, tells me everything I need to know about the odds of a trade continuing in the current direction or reversing.

Because an ETF consists of a diverse plethora of individual stocks, using fundamental analysis of the underlying stocks to predict the price movement of the actual ETF brings less than satisfactory results. The only way to have a greater than 50–50 chance of predicting the short- and intermediate-term trends of ETFs is through sound technical analysis.

This is why my hedge fund, Morpheus Capital LP, is one of the few professional hedge funds that primarily bases its investment and trading decisions on the technical analysis strategies I share with you in this book, rather than more traditional fundamental analysis and “long-term” investing. Although the techniques presented here are designed to work ideally with ETFs, individual stock traders can successfully apply the same techniques.


  • Why Use Technical Analysis with ETFs?
  • Major Types and Families of ETFs
  • The Top-Down Strategy
  • Finding Indexes with the Most Relative Strength
  • Selecting the Best ETFs
  • Supplementing the Basics
  • Strategies for Entry
  • Strategies for Exit
  • Ten ETFs Bought Long
  • Ten ETFs Sold Short
  • Tailoring Your Approach
  • Additional Pointers