ETF Trading System Made Easy: Simple method 100% automatic Profit from 25% to 125% annually depending on the market chosen

By Richard Bastien

How about a simple system to trade the stock market that gives a return of 50% or more per year? And you don't have to look for stocks that will give you that kind of return. You won't have to stay in front of your computer all day. A glance 2 or 3 times a day will be enough to know where the market is.

This system is for everyone, no matter if you have experience in trading or not. An amount between $5,000 and $10,000 is enough to use this system. It is a 100% automatic system based on the market movement (price action). It is not a "buy and hold" system. This system will prevent you from all the sharp market declines that occur on average every two years.

This system seeks to exploit the market movements on a few major indices such as the SP500, the NASDAQ 100, the TSE60 in Canada as well as the VIX which measures volatility (fear index). Later in the document these indices will be explained to you.

You will discover which market instruments to use to make such profits. These instruments, called ETFs (exchange-traded funds), replicate the movement of major market indices. They trade in the same way as any other stock found in the markets. Using an ETF allows you to own, for example, the 500 largest U.S. companies in a single stock. I'll explain this further in subsequent chapters.

It is also a very dynamic system that has little tolerance for loss and maximizes profits. You will see in subsequent chapters how losses are managed and how profits are maximized.

I will explain the concept of the intermediate cycle that will guide all the entries and exits of our market instruments. It is a very important aspect of understanding this cycle concept to always be able to place yourself in the market.

I will go through all the trades on one or more ETFs for an entire year especially the tough ones like 2018. I will walk you through step by step and explain how to identify an opportunity and then do the entry and exit price calculations for all the multi-year trades. There will be gains as well as losses. For this you can always refer to the trading table and charts for each ETF in the appendix. You can also view the charts yourself using the barchart.com website (free). The Chart Setup chapter will explain this in detail.

Finally, I would like to offer technical and even moral support to all those who will acquire this document. Please refer to the Author's Support chapter for more details on how to avail yourself of this support.

• Language: English
• Publisher: Lulu.com
• Release date: Mar 14, 2023
• ISBN: 9781329198630

Book preview

Introduction

How about a simple system to trade the stock market that gives a return of 50% or more per year? And you don't have to look for stocks that will give you that kind of return. You won't have to stay in front of your computer all day. A glance 2 or 3 times a day will be enough to know where the market is.

This system is for everyone, no matter if you have experience in trading or not. An amount between $5,000 and $10,000 is enough to use this system. It is a 100% automatic system based on the market movement (price action). It is not a buy and hold system. This system will prevent you from all the sharp market declines that occur on average every two years.

This system seeks to exploit the market movements on a few major indices such as the SP500, the NASDAQ 100, the TSE60 in Canada as well as the VIX which measures volatility (fear index). Later in the document these indices will be explained to you.

You will discover which market instruments to use to make such profits. These instruments, called ETFs (exchange-traded funds), replicate the movement of major market indices. They trade in the same way as any other stock found in the markets. Using an ETF allows you to own, for example, the 500 largest U.S. companies in a single stock. I'll explain this further in subsequent chapters.

It is also a very dynamic system that has little tolerance for loss and maximizes profits. You will see in subsequent chapters how losses are managed and how profits are maximized.

I will explain the concept of the intermediate cycle that will guide all the entries and exits of our market instruments. It is a very important aspect of understanding this cycle concept to always be able to place yourself in the market.

I will go through all the trades on one or more ETFs for an entire year especially the tough ones like 2018. I will walk you through step by step and explain how to identify an opportunity and then do the entry and exit price calculations for all the multi-year trades. There will be gains as well as losses. For this you can always refer to the trading table and charts for each ETF in the appendix. You can also view the charts yourself using the barchart.com website (free). The Chart Setup chapter will explain this in detail.

Finally, I would like to offer technical and even moral support to all those who will acquire this document. Please refer to the Author's Support chapter for more details on how to avail yourself of this support.

I am an ordinary investor like you, and I would like to share with you my long experience in the art of trading. I have been through thick and thin for over 35 years. This book is intended to make your life easier and to show you with evidence that the system you are about to learn is very simple and will bring you profits if you observe the necessary discipline.

Major market indices

I will now give a basic explanation of the major market indices on which the method I am proposing is based. For each of these indices there are one or more ETFs that can be traded with.

VIX

This index is important. It measures the volatility of the market. The higher the volatility, the more unstable the market. It is called the Fear Index. Most of the time this index fluctuates between 10 and 30. In great periods of stability like 2016 and 2017 the index was between 10 and 15 almost all the time. In 2018 the market became more unstable, and it climbed above 30 at times and very little below 15. We will see in the next chapter which market instruments or ETFs we will use to take advantage of VIX movements.

SPX (Standards & Poor 500) SP500

This index, also known as the SP500, is the most widely followed index in the world. It represents the 500 most capitalized companies in the United States. The number of market instruments available to trade this market is countless. I am not going to list and describe all these instruments. I will stick to those that will be useful to you in trading the SP500 (SPX). In the next chapter I will list the ETFs that you will use. There are some that trade in US currency and in Canadian currency.

NDX (Nasdaq 100)

This index is also widely followed. It represents the 100 largest technology companies in the US. This market is very dynamic and a little more volatile than the SP500. Higher profits than the SP500 are possible due to the dynamic nature of this market. There are quite a few market instruments available to trade the Nasdaq 100. In the next chapter I will list the ETFs that you will use. There are some that trade in US currency and in Canadian currency.

TSE 60

This index represents the 60 largest companies in the Canadian market. All market instruments are traded in Canadian dollars only. The performance is lower than the markets mentioned above. However, for the more conservative Canadian investor this may be a different option to use. I will mention which ETFs can be used for this index.

ETFs to trade each market

For each index mentioned in the previous chapter we will see together which market instruments (ETFs) we will be able to use to try to profit from the movements of each. For most of the ETFs that will be mentioned, a table of results has been built for all transactions since 2016 until today. See the chapters Results Tables and Results Analysis.

VIX

For the VIX we will use the SVXY (ProShares VIX Short term ETF). This instrument is traded in US money. With this ETF, the more the VIX index goes down, the more the SVXY goes up, which indicates a stabilization of the stock market. It is therefore said that it is the inverse of the VIX progression. This instrument was particularly profitable in 2016 and 2017 (over 100% gain each year). It is less profitable when the VIX is more above 15. It is still profitable in the order of 50% per year in these conditions. We will discover much more details on this subject in the chapter The Analysis of the results.

SPX (SP500)

For the SP500 we will use the SSO (Proshares Ultra SP500 2X). This instrument is traded in US money. This ETF replicates by a factor of 2 the movements of the SPX index. So if the SPX rises by 2% then the SSO rises by 4%. Same situation if the SPX falls by 2% then the SSO falls by 4%. The system we will see later in this document takes advantage of this characteristic without suffering the consequences given its high loss intolerance. It is this ETF that you will find in the trading results table.

There is also the possibility of using the UPRO (Proshares Ultra SP500 3X). This ETF reproduces 3 times the movements of the SP500. It therefore produces 1.5 times the results of the SSO. This ETF is traded in US money.

For Canadian market users, the HSU ETF (Betapro SP500 ultra 2X) can be used. This ETF reproduces the same performance as the SSO but is traded in Canadian dollars.

NDX (Nasdaq 100)

For the NDX we will use the HQU (Betapro Nasdaq 100 2x). This instrument is traded in Canadian dollars. This ETF replicates by a factor of 2 the movements of the Nasdaq 100 index, so if the Nasdaq 100 rises by 2% then the HQU will rise by 4%. Same thing on the downside. Just as with the SSO, the system I propose will take advantage of this characteristic without suffering the consequences thanks to a low loss tolerance. This is the ETF that you will find in the trading results table.

There is also the possibility to use the TQQQ (Proshare ultra nasdaq 100 3x). This ETF replicates 3 times the results of the Nasdaq 100 and therefore 1.5 times the results of the HQU mentioned in the previous paragraph. The TQQQ is traded in US money and is very liquid on the market. More than 20 million shares are traded daily.

Finally, there is another ETF that I discovered in late June 2020 that is showing incredible results. This ETF has only been around since 2018 though. This ETF primarily holds the stocks of Facebook, Amazon, Apple, Netflix, and Google. These 5 stocks represent the cream of the technology crop. This is the FNGU ETF. In addition, this ETF replicates the movements of these stocks 3 times. I made a chart of the results for FNGU, and the returns will surprise you. This ETF is traded in US money. The system I am proposing is working very well so far. We're getting over 100% returns per year so far. In the period from June 2018 to the end of December 2018 FNGU lost almost 70% of its value. However, the system managed to record almost 15% return during this period despite a sharp decline.

TSE 60

For the TSE60 we can use the HXU (Betapro TSE60 2x). I have not produced a result table for this ETF. However, if you apply the same rules as for the other indices you will get good results, but these results will be lower than the SSO for example. For Canadian investors who want to invest in Canadian dollars in a more conservative way, the HXU becomes a good choice.

I also want to tell you about another conservative but still interesting choice. The XFN ETF, which represents the Canadian financial sector, contains among others the six major banks and other flagships of the Canadian financial sector such as Power Corp. and Power Financial for example. You can use the same system for this ETF. I have produced a table of results for this ETF. This market will give you an average of 25% return year after year while collecting several monthly dividends.

Summary Table

Chart Setup

To fully understand how the system I am proposing works, you need to understand how to use the charts for each ETF mentioned in the previous chapter. This chapter shows you how to display the charts on the BARCHART.COM site on your computer. You can also use a charting tool of your choice.

Here is the procedure with www.barchart.com:

In your browser, enter in the top line: barchart.com This will bring up the home page.

To the right of the BARCHART title on the web page, type in the symbol of the ETF you have chosen, for example SSO. A drop-down list will appear with a description of the ETF. Click on your choice which will appear at the top of the list. For Canadian ETFs add at the end of the name: .TO. So for the HSU ETF you enter HSU.TO.

A lot of information about the selected ETF will appear. Click on the Interactive chart link to the left of the page and up. You will then see the chart appear. However, for the purposes of the proposed system you will need to be set to the following specifications:

At the top of the graph there are several boxes. Click on the Settings box. Under the heading BAR TYPE choose the option Candelstick Open to Close and then click the Apply button at the bottom of the dialog box. You will see the chart change its appearance to candlestick bars.

Now locate the word Frequency a little bit down from the Settings box used above. Choose the frequency WEEKLY.

Locate the icon to the left of the word Date to the right of the frequency. Click on the icon and you will see a dialog box that allows you to choose the date range you would like to see on the screen. For example, choose the interval from January 1, 2015 to December 31, 2015.

Then locate the Study box on the same line as the frequency and click it. A long list will appear. Using the drop-down bar to the right of the box choose Moving Average Exponential. Another dialog box will appear. In the Period box enter 5 and click ADD and you will see the moving average displayed on the graph.

One last thing. Click on the Study box again. This time locate the following indicator: MACD Oscillator Exponential and click on it. This indicator is very far down the list. Another dialog box will appear. In the Period1 box enter 2. In the Period2 box enter 5. In the Period3 box enter 2 and click ADD. You will then see the MACD indicator appear at the bottom of the chart, which will be used