Conversely, if the ETF begins to drop below its 50-day average, investors should begin to closely monitor the fund. If the same ETF drops below its 200-day average, then it is time to let go.
Additionally, we maintain an 8% stop-loss off the most recent highs on our ETF trades to provide a precise cutoff point in case of highly volatile market conditions.
By following a strict strategy, investors will not have to deal with the back-and-forth, emotional vacillations and rely on logical steps to help maintain their investment decisions.
For past stories in this series, visit our “What is an ETF?” category.
Max Chen contributed to this article.