Comments on: An ETF Trend-Following Plan For All Seasons

By: Tom Lydon

Tom Lydon — Fri, 20 Nov 2009 12:15:43 +0000

We use the one-year 200-day moving average and watch the prices daily.

By: alex85

alex85 — Thu, 19 Nov 2009 21:50:55 +0000

Tom,

Do you tend to examine the price movements relative to the 200-day moving average on a weekly chart? monthly?

By: singbone

singbone — Tue, 17 Nov 2009 17:50:08 +0000

Thank you, Tom, for KISS . However, if an ETF is arguably “overbought” isn't “and an investor still wants in” akin to following the herd, i.e., buying in when ETF in an overbought situation? According to stochastics on interactive charts on Yahoo, if you agree they are creditable, there may be only a few ( 3 – 4) x year to seize a “buy” opportunity. What about a hybrid strategy of buying when ETF has descended below and is starting to rise above “oversold” situation (30%) and your 200EMA/8% rule for when to sell? I can be patient.

By: Tom Lydon

Tom Lydon — Tue, 17 Nov 2009 12:29:54 +0000

We prefer to keep the strategy simple. But if there are concerns that a position is overbought and an investor still wants in, then put in half, wait until it goes up 5%, then put in the rest.

By: singbone

singbone — Mon, 16 Nov 2009 21:10:24 +0000

Tom,

Your book makes no mention, as far as I can tell, of stochastics as SUPPOSEDLY buy/sell signals for any etf rising above 70% as “overbought” or descending below 30% (oversold) . According to such analysis, and I may have this wrong, one should wait until stochastic shows pattern of rising above 30% as a “buy” and “sell” when it shows pattern of descending from anywhere above 70%. Your 200EMA/8% rule certainly simplifies when to buy and sell. I am an investor and wonder if stochastics, in your opinion , is unproven, etc as to when to get in and out of a stock or etf.

By: Tom Lydon

Tom Lydon — Mon, 16 Nov 2009 12:30:02 +0000

We use the one year.

By: singbone

singbone — Sat, 14 Nov 2009 03:35:33 +0000

Tom,

Just bought and finished reading your “ETF Trend Following Playbook” and re the 200 EMA, there seems to be considerable difference using Yahoo's interactive charts when using various time lines such as 1D, 5D, 1 month, 3 mos, 6 mos 1 yr, etc. The shorter the time line , the closer is the share price to 200 EMA. And thus less wiggle room. Which time frame do you recommend using?

By: dave_altware

dave_altware — Fri, 16 Oct 2009 13:13:48 +0000

Got it. Thanks Tom for your efforts here!

Dave

By: Tom Lydon

Tom Lydon — Fri, 16 Oct 2009 12:31:01 +0000

The recent high is based on the last high the ETF hit after you bought it (the trailing high). The time frame could be anywhere from a week to six months.

By: Tom Lydon

Tom Lydon — Fri, 16 Oct 2009 12:30:21 +0000

Yes – whipsaws are the risk you take. The 200-day moving average just gives an investor the opportunity to participate in any potential long-term uptrend, but there's no guarantee that the trend isn't over tomorrow. As for 8% off the recent high, it's based on the last high the ETF hit after you bought it (the trailing high). The time frame could be anywhere from a week to six months to longer.