FAQs: About our System

Description: Trading System, trading, ETFs trading system, signals, trading strategy, ETFs

In our FAQ section, we've provided detailed answers to some common questions about our trading system. We suggest that you review these questions and answers before sending an email to our support department. If you did not find an answer to your question, please check our "Signals FAQs" section. If you still have questions after reviewing this section, please send us an email.

• How easy is it to use your trading system?
• Why do you select Exchange Traded Funds for your system and which ETFs do you cover?
• Is your ETFs trading system 100% mechanical?
• What does your trading system use to generate signals?
• What trading strategy (money allocation strategy) can be used with your system?
• How much is required to trade with your system?
• How often does your system generate trading signals?
• How long does your position stay open?
• Does your system have stop-loss?
• What action can you take to protect your system from losses?
• Where can I see an example of signals generated by your system?
  

• How easy is it to use your trading system?

  Our system is very simple and easy to use. When the system generates a "Long" signal, it means that we will buy on the next trading day at the market's opening price. When our system generates a "Short" signal, it means that we will sell when the market opens on the next trading day. When our system generates a "Cash" signal, it means that we will close our previously opened position on the next trading day at the market's opening price.
  
  (Read more about it in Simple Trading System)

• Why do you select Exchange Traded Funds for your system and which ETFs do you cover?

  Our system generates signals for QQQQ, SPY, DIA, FLF and IWM Exchange Traded Funds.
  
  There are several reasons why we use these ETFs in our system:

  •  QQQQ, SPY, DIA, XLF and IWM are among the world's most frequently traded stocks. As a result, they are extremely liquid. Consequently, it is very easy to open and close a trade with them;
  •  ETFs are traded like stocks, but have features of mutual funds. You may trade them during trading hours and trade them on margin. They have no sales loads (although brokerage commissions will apply), have no high management or sponsor's fees and are tax efficient;
  •  QQQQ, SPY, DIA, XLF and IWM track indexes (NASDAQ 100, S&P 500, DJI, S&P 500 Financials and Russell 2000 respectively). Because they are the same as indexes, they cannot file bankruptcy. This precludes the possibility of losing an entire portfolio;
  •  Exchange Traded Funds provide diversification within a benchmark index. For example, by investing in QQQQ, you invest in 100 public companies that are listed in the NASDAQ 100 index. One small investment (one transaction) enables you to diversify your portfolio;
  •  The main reason to invest in ETFs is that NASDAQ, Standard & Poor's, Wall Street Journal and Russell Inc. have already done fundamental analysis and selected only stable and good companies for the index listing - there is no need for us do it. Furthermore, ETFs trading system is more able than stock trading systems to rely on technical analysis. With stock trading, there is a need to perform fundamental analysis and technical analysis together and fundamental analysis can be quite time consuming.

• Is your ETFs trading system 100% mechanical?

  Our system is 100% mechanical. It collects and analyzes market data automatically and automatically generates signals. However, after a signal is generated the system sends it to our analysts who verify it before publishing it. It would be more correct to state that our system is fully automatic, but has some level of subjectivity due to human involvement. As a rule, our analysts may not generate signals to open a trade. However, they may close a trade and issue a stop-loss if they see a possibility of change in a trend direction and a necessity to cut losses or protect profit.

• What does your trading system use to generate signals?

  Our trading system uses index-based technical analysis to generate ETFs signals. Since ETF always tracks its benchmark index performance and never the opposite, it is better to analyze indexes and not Exchange Traded Funds.
  
  S&P 500, DJI, NASDAQ 100, S&P 500 Financials and Russell 2000 are the main indexes we analyze. However, since mid-term trends of these indexes reflect the general trend of the U.S. economy, we may consult other indexes that cover other market sectors.
  
  Our system collects and analyzes price, volume, and advances and declines. Consequently, we use several technical indicators to generate signals. At the same time, we monitor volatility. Some of the technical indicators that we use in our system are: Stochastics, Moving Averages, Money Flow, Advance/Decline Ratios, the McClellan Oscillator and ATR.

• What trading strategy (money allocation strategy) can be used with your system?

  As a rule, we do not recommend investing an entire portfolio in our ETFs trading system. We especially caution against investing all of a trader's money in a single trade (especially, if it is in a pension account). It is a smart decision to have no more than 10% of your investments in any trading system. At the same time, it can be a good trading strategy to withdraw profit from the trading system portfolio from time to time, in order to protect earned profit.

• How much is required to trade with your system?

  As a rule, the minimum amount required to use for any trading system is an amount that is sufficient to at least cover the expenses connected with trading, which include brokerage commissions and a subscription fee.
  
  Usually, we recommend that you calculate the minimum amount required to try the system before using it. The calculation can be based on the trading system's historical performance. You will need to calculate two numbers from the historical data: 1) the average number of trades, and 2) the system's average return.
  
  For example: In order to buy and sell stocks or Exchange Traded Funds (QQQQ, SPY, DIA, XLF, IWM), you must make two transactions (buy and sell) and pay $20 commissions in total (or less, depending on the broker). If a hypothetical trading system generates three signals per year and the monthly subscription fee is $20, the system's average annual expenses are (12 x $20) + (3 x $20) = $300. Now, if you intend to invest $5,000 in this trading system and you see from the history that this system may deliver 10% ($500) gross profit per month on average, then you can assume that you will put 4% ($200) of net profit per year into your pocket.
  
  Or, if a system's yearly expenses are $300 and the system can deliver 10% in gross profit per year, then the minimum recommended amount to invest in this hypothetical system is $3,000 - although this may only cover expenses (10% of $3,000 is $300)

• How often does your system generate trading signals?

  Depending on the market, our system may generate from 1 to 5 signals per year. In a highly volatile market (when the market's mood changes frequently), our system may remain longer in cash to await stronger and more conservative signals. At the same time, in a less volatile market, when the trend is clearer and trading is considered to be less risky, our system could generate more signals.

• How long does your position stay open?

  Depending on the market condition, a system could have an open position for a period of several days to several months.

• Does your system have stop-loss?

  Yes, we have a stop-loss parameter. A stop loss can be issued at the same time that a signal is generated. On the other hand, a signal can be generated without a stop-loss, which can be set later when there is a need to cut losses or protect profit.

• What action can you take to protect your system from losses?

  As mentioned above, our system generates signals to open a trade, but a person may set a stop-loss or close a signal. Basically, these are two actions that can be undertaken to protect a signal from big losses or to protect an already profitable position.
  
  Nevertheless, if a trader feels uncomfortable about an open position (trade) that was initiated as a result of following our signals, he or she should close it without waiting for us to set a stop-loss or close a signal.

• Where can I see an example of signals generated by your system?

  There are seven types of signals that can be issued by our trading system:

  • When a "Long" signal is generated;
  • When a "Short" signal is generated;
  • When a trade is opened;
  • When the system recommends to enter or change a stop-loss
  • When a "Cash" signal is generated;
  • When a trade is closed;
  • When there are no changes in a signal.

 

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