ETF Swing Trading for Beginners: Finding the Best ETFs

One of the ways new traders can minimize risk is through investing it ETFs {exchange traded funds}. These types of stocks are great because rather than risking it all on one stock, you can diversify by buying many stocks in an index with just a few clicks of a button. Today we are going to talk about the basics for ETF swing trading for beginners.

Finding The Best ETFs to Swing Trade

The first challenge in swing trading ETFs is to find the right ETFs to trade. The best way to do this is to conduct some research and then look for the indicators that show a stock may be a good eligible candidate to swing trade.  Think of indicators as information that will help you predict the future prices of stocks. They are like your own personal stock fortune tellers.

Since we are focusing on ETF’s for this article, your job will be to find indicators that will help you choose the right ETF’s.

Research the Sector: Understanding the Industries

One of the best ways to find indicators concerning individual ETF’s is to do some research on entire sectors.  Some examples of entire sectors would be, the energy sector, the pharmaceutical sector, the entertainment sector, and so on. Each of these funds group together stocks in similar industries.

An Example: The Solar Sector

This chart below shows the solar sector from 2011 to 2015.

As you can see there was quite a buzz going on from 2013 to 2014.  Here the indicator that you would have noticed was the major spike that just kept on going up. This indicator is known as a trend.  A trend is when you see a clear pattern in price movement over a period ot time (the longer the time period the trend continues the easier it is to recognize) using past data.

What this means is that you could have searched for solar ETF s such as TAN or KWT and swing traded them for a couple of months and made some nice profits. Let’s take a look and see how these 2 ETF’s performed from 2013 to 2014.

The chart above shows how TAN performed in 2013.  As you can see it too followed the industry trend and would have been a great swing trade.

Now, let’s look at KWT

Again, this ETF followed the upward industry trend and would have been a great swing trade if you held it for let’s say 6 months or so in 2013.

What about other indicators across an entire sector?  Let’s look at something more current.

Latelty,  the energy sector has been trending down. (As of the late summer/fall of 2015)  Now, Let’s look at how the oil sector has been trending.

As you can see the price was steadily dropping until September of 2015 and then seemed to rebound and level off.  Let’s look and an Oil ETF and see how it compares.

Above is the ETF known as OSO .  It followed the same trend.  Thus it was trending down from July until late August.  The price went down so you would not have wanted to buy an oil ETF during that time right?  Maybe not.  There are actually ETF’s that bet against certain industries.  A great example of this would be an ETF known as DRIP.  It trades on the inverse or opposite of the oil index.  Let’s see what its chart looks like from July to late August.

As you can see you actually could have made money swing trading this downtrend by investing in an inverse ETF.

So what now?  That’s the hard part.  Since the current trend seems to have leveled off this one will not likely have much activity.

Your Own Research Is the Best Research

The best ETF swing trading strategy is to start doing your own research.  Start learning some other swing trading indicators such as charts and patterns.  You can learn more about charts here and here.

Many people want a free and easy method for finding the next big ETF. Unfortunately, there is no magic pick that somebody can give you.  You have to do your own research, find new indicators, analyze various industries on your own and then the hardest part is you have to guess if you think the trend will continue or not.

Always remember that while trading ETF’s is safer than stocks there is still great risk.  If you rely on somebody else to give you their own ETF picks you stand a large chance of losing a lot of money or even all of it.  You have to learn to pick the ETF’s yourself and then hope you are right.  (Even that is risky!)

Finding the best ETF’s as a beginner trader is extremely challenging but with enough work and dedication you might begin to have success in finding them.  When that happens swing trading can be really fun and rewarding.

If you have any questions or comments please share below.  Perhaps you have found some trends and indicators concerning ETF’s that you would like to share. Comments are always welcome below!