Whiddon Wealth Management, LLC 2410 Westgate Blvd., Suite 108 Albany, Ga. 31707 T: 229-888-8308 T/F: 866-888-5111 ETF Trading Strategy Bigfoot, Whiddon Wealth Management, LLC and LPL Financial are separate unaffiliated entities.
What is an ETF? An exchange traded fund is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Source: Investopedia.com
Risks Involved with an ETF • An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
ETF Strategy Methodology: • ETFs Selection • Screening Process • Find Top Performing ETFs (Relative Strength) • Find ETFs on the Uptrend (Moving Averages) • ETFs Trading Strategy • Trading Rules for Buy/Sell Signals • Momentum
ETFs Selection ETF UNIVERSE • Top 5 of Conventional Assets • Top 5 of Currency Assets: • Top 5 of Geographical Assets: • Top 5 of Non-Conventional Assets: • Ranked by: • 3-Month Relative Strength • 20-Day Relative Strength • 20-Day Volatility* TOP 20 ETFs Trendline Analysis Price > 10 SMA Relative Strength Analysis TOP 4 ETFs ‘Simple Moving Average – SMA’ A simple moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react. *Volatility is the annualized standard deviation of daily returns
ETF Trading Rules • Buy Top 4 ETFs, based on momentum strategy ETFs selection, at the beginning of the month. (If there are not 4 ETFs that meet our proprietary screening, we will shift the allocation to cash) • Sell all ETFs at the end of the month, unless an ETF remains in the Top 4 for the following month. If that is the case, hold existing position and add new positions. • Trailing stop of 8%. If the security at any point falls below 8% of it’s week ending, highest price, it is sold and the money remains in cash until the end of the month.
The hypothetical portfolio contains inherent limitations: Investor/firmwould have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. Changes in these assumptions may have a material impact on the client portfolio returns. Certain assumptions have been made for modeling purposes and are unlikely to be realized. No representations and warranties are made as to the reasonableness of the assumptions. This information is provided for illustrative purposes only on should not be construed as advice to buy or sell any particular security. No strategy can guarantee profit or protect against a loss. Past performance is not indicative of future results. Investors should consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information. You can obtain a prospectus from your financial representative. Read carefully before investing.
Glossary of Terms Conventional Asset: Assets which represent different sectors of the economy (i.e. Tech, Financials, Consumer Staples, etc.) Currency Asset: Assets that track the currency of a country or region (i.e. U.S. dollar, Euro, Yen, etc.) Geographical Assets: Assets that concentrate investing in a specific country (i.e. Germany, India, China, etc.) Momentum 1 :The rate of acceleration of a security's price or volume. The idea of momentum in securities is that their price is more likely to keep moving in the same direction than to change directions. In technical analysis, momentum is considered an oscillator and is used to help identify trendlines. Moving Average 1 :An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance. Non-conventional Asset: Alternative assets such as commodities, gold, bonds, and inverse Relative Strength 1 : A momentum investing technique that compares the performance of a stock, exchange-traded fund or mutual fund to that of the overall market. Relative strength calculates which investments are the strongest performers, compared to the overall market, and recommends those investments for purchase. Relative strength is a "buy high, sell higher" strategy that assumes a stock whose price has been rising will continue its upward trajectory. Standard Deviation 1 : A historical measure of the variability of returns. If a portfolio has a high standard deviation, its returns have been volatile. A low standard deviation indicates returns have been less volatile. Trendline Analysis 1 : Analyzing a line that is drawn over pivot highs or under pivot lows to show the prevailing direction of price. Trendlines are a visual representation of support and resistance in any time frame. 1. Source: Investopedia.com