StockFetcher Forums · General Discussion · Why are ETF's preferred over Securities?<< >>Post Follow-up
BlackBars
54 posts
msg #141004
Ignore BlackBars
1/15/2018 12:57:07 PM

I am no expert when it comes to Exchange Traded Funds however I have noticed that a lot of people on here seem to prefer trading ETF's over regular stocks. I would love to know why?

pthomas215
1,251 posts
msg #141005
Ignore pthomas215
modified
1/15/2018 1:14:05 PM

3 reasons. movement, movement and movement. in my opinion, simply put--if you are really confident in your position and proposed trade--you will make a lot more with that selected allocated capital for that period of time you tied up the capital.

BlackBars
54 posts
msg #141006
Ignore BlackBars
1/15/2018 1:37:06 PM

Ok, so regarding backtesting and its elements, would ETF's be a better choice to create a system off of rather than just stocks? Keep in mind curve fitting, price action indicators and such.

shillllihs
4,880 posts
msg #141007
Ignore shillllihs
1/15/2018 1:52:01 PM

Safety. What's most likely to occur, 1 stock go to zero or 200 stocks go to zero?
Leverage and good volume to name a few, plus moves seem more predictable.
Trading individual stocks has become antiquated. It's ok if you dabble though.

BlackBars
54 posts
msg #141008
Ignore BlackBars
1/15/2018 1:58:35 PM

Good point, but a lot of them follow the market even on the smallest moves which I do not totally understand. Aside from that though if I want my strategy to have a max hold of 3 days, would ETF's be better then stocks regarding short term performance?

spauken
44 posts
msg #141010
Ignore spauken
1/15/2018 2:25:52 PM

You will probably get more bang for your buck trading trading individual stock vs an ETF if you are limiting your holding period to 3 days. ETFs are baskets of stock, so they are more diversified which tends to dampen price movements (unleveraged ETFs tend to be less volitile). That being said, be careful holding individual stocks during earnings announcements. They can drop by a significant percentage should the company have an earnings miss.

miketranz
783 posts
msg #141014
Ignore miketranz
1/15/2018 5:23:54 PM

Most ETF's offer greater liquidity,lower risk spread over many stocks reflecting an entire sector,smoother price movements (lower volatility),less price manipulation,than individual stocks.One single stock with bad news overnight(that's when they get you) can wipe out your account.That same stock mixed into an ETF will only put a slight dent in your account.Strictly from a risk/reward standpoint,ETF's are the way to go...

nibor100
434 posts
msg #141016
Ignore nibor100
1/15/2018 7:06:51 PM

@BlackBars,

1. Another reason in answer to your first question is that since most can't short stocks in their retirement accounts they can go long on an inverse ETF and simulate the short they desired.

2. Regarding backtesting ETFs, many have a short history, for example the XIV that is a popular SF ETF to follow doesn't have data as far back as the bearish market of 2008 as it started in late 2010. Some advise to use technical indicators on what the ETF is tracking as opposed to the ETF itself lots of differing opinions on that issue.

3. Learn all you can about the ETFs you are interested in, read the propectus and in any research available as there are nuances about how ETFs are managed that are very different than ordinary stocks.

Ed S.



BlackBars
54 posts
msg #141017
Ignore BlackBars
1/15/2018 7:25:25 PM

That makes sense but aren't most ETF's heavily correlated with the overall market itself, which would be a problem if you were not looking at news every day? Also what I have seen in technical analysis often regarding ETF's is the basic example of the market's news most times weighing down on its movement even if the ETF has a lot of momentum and strength behind it.
Correct me if I am wrong but if most ETF's are so correlated with the market, wouldn't the prime way to trade them would be by playing the market news?

StockFetcher Forums · General Discussion · Why are ETF's preferred over Securities?<< >>Post Follow-up

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