Attention new members...
This model has generated very impressive returns but like any good system it also requires discipline to achieve its success. As a general rule of thumb with any trading strategy, we have found that most traders lose their discipline for two main reasons:
#1. They trade positions that have too much risk and this leads to incorrect trading decisions such as taking profits too soon, and selling to prevent losses at the wrong time. The best way to overcome this problem is to start slowly.
#2. They don’t understand and believe in the trading rules of the system.
The rules of this strategy are intentionally very simple to overcome the problem of systems being too complicated to understand or believe. Start slowly and develop your trust and belief in the strategy.
You do not need to start with real money, and you do not need to start big! Building bigger positions is easy once you are comfortable and knowledgeable. The most important part of getting started is finding the right low risk way for you to begin. The questions and answers below should help you find the best way for you to start.
How do I start trading this strategy?
To get started you will enter the same positions the model portfolio is holding and make each position replicate the percent holding of the portfolio. For instance, if the model portfolio position #1 is equal to 33% of the portfolio value, then your position #1 should be 33% of the capital you have allocated to this strategy. We have two tools that will make this very easy to figure out.
When you setup your ETF Complete portfolio this way it will follow the performance of the model portfolio. Note, there will be some discrepancies in your performance vs. the model's due to slippage and commissions.
For a detailed description of how to get started and access to the simple tools to help you determine your initial position sizes go to the "Starting a Portfolio" section in the Tools area of the member area.
Will the trade alerts be sent via email or text message?
Every time the model gets a trade alert we will send an email to the address you used to register for the ETF Complete Portfolio. You can also choose to have a text message sent to you. In order to receive text messages you must register your text messaging phone number in the Manage Mobile Alerts section of the member area.
If you would like to see the history of recent alerts, you can view them listed in the Position Updates section of the member area. If you would like to see all open and recently closed positions, they are tracked, along with their returns, in the Model Portfolio area of the member area.
When and how often will I receive trade alerts?
All new trade alerts or position changes are generated after the market closes. The turnover of the positions are such that you should not expect daily or even sometimes weekly changes to positions. However, with the stops and targets, they can be hit intraday.
Where can I find your free tool to track my personal trades?
We have created a free Excel spreadsheet for you to download that will help you easily track your trading (simulated or real) of the ETF Complete Portfolio alerts. Use the link, Trade Tracking Tool on the top navigation bar in the member area to get this tool.
How much capital should I use to trade this strategy?
The question of how much capital a trader should allocate to any trade or strategy is going to have a different answer for every trader. Additionally, MarketGauge not licensed to be able to give that type of specific advice. A good rule of thumb is that you should start slowly.
Regardless of how you start, you should always limit your capital to an amount which represents a level of risk that you can afford to lose. We’d even recommend paper trading the model for several weeks or months so you can experience the strategy’s volatility before committing real capital. You’ll find a spreadsheet that we’ve created to help you track your trading (simulated or real) in the Trade Tracking Tool section of the member area navigation. This is a simple way to keep up your own version of the model portfolio.
Trading the entire portfolio will significantly reduce some of the volatility of just trading a couple ETFs or one part of the complete model, however, there can still be some volatility.
How much capital should I allocate to each position?
The Tools section of the website had a handy calculator showing the recommended allocation percentages and a sample portfolio based on $5,000 capital. This will allow you to start a portfolio at anytime that mirrors the model portfolio and should closely approximate the performance going forward (small differences can occur due to share rounding with small portfolios). Detailed instructions can be found on that page.
Do I need to wait for a trade alert to enter my first positions?
We recommend for new members to check out the Tools section of the website and use that calculator to get started at any time. Detailed instructions can be found on that page.
How can I test this idea before committing any capital?
It’s a good idea to get comfortable with a trading strategy that is new to you before you take on any significant level of risk. You should also anticipate that the profit and loss volatility will be higher than the general market. The higher volatility is one reason the model is able to outperform the general market so dramatically!
We created a Trade Tracking Tool for you to easily keep track or when you enter and exit positions and the resulting profit and loss. This is an easy way to “paper trade” in order to experience how this trading strategy trades. This can also be used to keep track of any real trading you do with the model.
How can I start slowly to limit my risk?
For most traders starting slowly (with very limited risk) is the best way to start any new strategy. This strategy is easy to start slowly and then build up as you get comfortable. Do not try to hit a home run immediately.
This model seeks to build wealth over the long term. It does not seek to make quick hit home runs. Your best first step is to get comfortable and knowledgeable of how to it trades. This will lead to simple, quick and correct trading decisions that will be easy to manage in minutes a week.
There are a couple of ways to start slowly, and both are probably best served by first getting the Trade Tracking Tool we created for you to track your trades.
Next, you can either paper trade the model or allocate a small amount of money to get started. Don’t focus on how much money you’re going to make before you first get comfortable with how the model trades. “Getting comfortable” means you’ll experience any volatility the model’s positions may experience relative to the general market. You’ll experience waiting for the model to indicate a change in the positions rather than focusing on pre-set price levels for exits and entries.
Once you have a little experience with the model there is nothing that will prevent you from doing more with it, so there is no harm is starting slowly, and with limited risk.
Where do I set stops?
Each of the three component models (Sector, Country, Global Macro) have their own sets of stops and targets tailored to the typical volatility of their ETFs. In the open positions page we display the current stop and target. At each target, we take off 1/3rd of the original position. The daily emails will alert you to any changes to the trailing stops or when a target is reached. The stop remains fixed for a new entry until it reaches the first target at which point we first move it to break-even (the model's initial entry price) and then trail it up if it reaches additional targets.
Typical trades can make money without hitting a target as the initial target is quite wide (between 15% and 25% depending on the ETF). A lot of trades will make handy profits and we will exit via a position rotation without necessarily hitting a target.
What happens when my positions are no longer equal dollar amounts?
Over time some positions will outperform others and cause your positions to be “out of balance”. The model balances all positions (taking into account cash from profit taking) twice annually in January and July. Members can use this methodology and timing, use an alternative method (like looking at differences between largest and smallest position), or choose not to rebalance if the differences are small or trading costs are high.
With nine potential positions, it can become a rather complicated transaction to rebalance all of them. For smaller accounts, it probably does not make sense to rebalance frequently. The guiding principle is that you want to diversify your risk and not have it all tied up in one or two positions. As long as you are roughly balanced, being precisely balanced does not necessarily improve your performance.
Why not use the Opening Range to trade these ETFs?
The short answer is that it was too complicated to model at this time. We designed and back-tested this strategy so that it would be easy to follow and execute. And it is good to know that the results are possible trading the model in the easiest possible way. However, you can use the model results as a guide for trading these instruments in any possible way. There is no reason why Opening Range and other types of MarketGauge analysis wouldn't work on these ETFs.
What is the TSI rank?
This is our proprietary generated Trend Strength Indicator (TSI). It is one of the key parts of our model. We use this number to determine which three of the ETFs in our model to hold. You can view this number on the "Model Components" section of the website. From there you can see how all the different ETFs stack up and which ones might be the leading contenders to replace our current holdings.
Why Are You in an ETF that isn’t in the top 3 current Ranks?
For our initial entry positions, we take the top three ranked ETFs based on our TSI indicator. Once we are in those positions, we implement an internal system that is designed to reduce unnecessary or excessive turnover in our holdings. Our model calculates and compares the volatility of the holdings so that a position can move out of the top 3 but remain a holding until its TSI score diverges by a certain threshold.
This is a dynamic calculation that scales with the TSI and volatility of the positions - so the amount of divergence allowed can and will be different at different times. In our backtest, we found this system dramatically reduced the amount of turnover while actually improving the overall performance of the model.
Why trade ETFs?
ETFs are great trading vehicles for a position rotation strategy. Many of them are already created and organized around the idea of giving someone exposure to specific industries, sectors, and regions. They contain diversified holdings that allows us to avoid much of the business and news event driven risk associated with holding individual stocks. They are also cheap, boasting some of the lowest fees in the industry.
Why are you using leveraged ETFs?
The latest leveraged ETFs are a great addition to our market toolbox. They offer the opportunity to gain more performance while still maintaining our concentrated focus. We have carefully selected the leveraged ETFs that meet a minimum volume criteria and have sufficient trading history to be incorporated into our model.
When we display a leveraged ETF in the Model Portfolio are it will have a "(3x)" next to the description. Trading leveraged ETFs may not be appropriate for all members or all types of trading accounts. You can substitute a non-leveraged equivalent for the leveraged ETF (like XLK instead of TECL for technology exposure). Any specific questions about ETF alternatives can be directed to customer support.
What is a "Quant Model?"
The ETF Complete Portfolio is called a quantitative model because we use a systematic method to calculate our ranking system and trade management. We can then "run" this model over the historical data to gauge its performance. We believe that the model’s performance is robust and should provide opportunities to outperform the broader market.
How do you buy at the open?
If you would like to place orders before the market opens and get the "open" price you should use an order called "Market on Open". Each broker or trading platform may have a slightly different name for this type of order so check with your broker if you are not familiar with it.
This order is generally placed 5-10 minutes before the open and gives you the “open” price. The open price is determined by a process where the pre-market open orders are evaluated by specialists which determine the market clearing price at the open. You may also place market orders immediately after the market opens to enter these orders. Your entry should typically be very close to the one described in the model.
If I decide I want to increase the amount of capital to trade the ETF Complete Portfolio, how can I add funds to my existing trades?
The easiest way to add funds to the model is to use the recommended allocation found in the Tools section of your members area. Additional allocations for small account may generate an a lot of trading costs since there are up to 9 positions. Please take this into account when factoring in your allocations or any changes to how you trade the model.
You could also add funds at any time, with the understanding that adding funds adds risk and the cost-basis and risk-reward ratio will be different for the new funds.