Leveraged ETFs Enjoy Spike in Volatility, But Have a Plan in Place

As traders seek out ways to hedge their fixed-income and equity portfolios against these swift short-term turns, it is better to have a plan in place than to give in to emotional trades, which may often do more harm than good.

“We encourage people to be looking, thinking and implementing a strategy,” Andy O’Rourke, Managing Director, Chief Marketing Officer of Direxion, told ETF Trends in a call.

“Traders should get a handle on entry and exit points,” David Fajardo, SVP, ETF Marketing, Chief Content Officer of Direxion, told ETF Trends.

On-Demand Webcast: ETF Strategies to Capitalize on Short-Term Moves

Traders may implement a trend-following strategy based on technical analysis of short-term moves around the 50-day moving average. If an ETF breaks above its 50-day after a prolonged period of underperformance, then an investor may consider a position.

Alternatively, after a pullback from recent highs, a trader could consider re-positioning in an ETF that slipped below its 50-day. If conditions are painful enough and an ETF goes below its 200-day line, it may also signal a buying opportunity, especially given the ongoing positive outlook for U.S. markets.

For more information on geared products, visit our leveraged ETFs category.