What is the difference between an 8-rated exchange-traded fund (ETF), a 9-rated ETF and a 10-rated ETF?
All of the exchange-traded funds that have earned ETF PowerRatings of 8 or higher belong to that category of “consider buying” exchange-traded funds that short-term traders should be on the lookout for. These are the ETFs that, according to our quantified backtesting of hundreds of exchange-traded funds in thousands of simulated trades, have made significant gains in the short term.
By short term, I mean the swing trader’s “sweet spot” of 5-7 days – though many ETF PowerRatings trades are as few as two or three days, especially when trading our highest rated ETFs that have earned ETF PowerRatings of 10. And by significant gains, consider how this ETF performed shortly after receiving an ETF PowerRatings upgrade to 10.
This pullback in the iShares MSCI Canada Index Fund ETF
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PowerRating) was sharp enough to merit an ETF PowerRatings upgrade to 10 on two occasions during the correction.
And here’s an example of an ETF that made significant short term gains after its ETF PowerRating was upgraded to 9.
One day after a particularly sharp pullback in the iShares Dow Jones U.S. Regional Banks ETF
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PowerRating), ETF PowerRatings traders were able to buy into a 9-rated fund.
Our highest rated ETFs, those exchange-traded funds that have earned ETF PowerRatings of 10, have produced significant short term gains nearly 80% of the time. Those ETFs that have earned upgrades to 9 made similarly strong short term gains more than 77% of the time.
So do I buy an 8? Do I wait for a 9? Is it worth it to hold out for the 10s?
ETF PowerRatings provide short term traders with the opportunity to be as aggressive or as conservative as they want to in their own ETF strategies. An aggressive ETF trader will be more likely to buy an ETF with an ETF PowerRating of 8. This trader knows that he or she will probably not do as well on a per trade basis as the more conservative ETF PowerRatings trader who only trades 10-rated funds. But the more aggressive trader will benefit from a far greater number of trades by comparison.
The more conservative ETF PowerRatings trader will no doubt miss some excellent trades. Below is an example of an ETF that soared after a modest ETF PowerRatings upgrade to 8.
Even an 8-rated ETF like the iShares MSCI Japan Index Fund ETF
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PowerRating) can produce gains in the short term when bought on pullback.
A more conservative ETF trading strategy would have missed this trade – and others like it. However, on a per trade basis, the conservative ETF PowerRatings trader will be without peer, only trading those ETFs that have historically made significant short term gains nearly 80% of the time based on our research into exchange-traded funds going back to 2003.
Whether you are a conservative or an aggressive ETF trader – or somewhere in between – ETF PowerRatings provide a unique, quantified way to take advantage of the current market volatility. By signaling which exchange-traded funds have been put “on sale” by market forces, ETF PowerRatings make it easier than ever for short term traders to “buy the selling and sell the buying” – just as professional traders and market makers have done successfully for decades.
David Penn is Editor in Chief at TradingMarkets.com.