There are a wide variety of ETF trading strategies. The most important factor in any trading strategy is that it is effective. Here are some basic strategies used to trade ETFs (Exchange-Traded Funds).

News Trading Strategies – Placing trades in anticipation of news that may move the market is a very common strategy. Basically a trader places a trade based upon how they believe the news will affect the price of the ETF. If the trader feels the price will go up after a news release they buy. If the trader feels the price will go down after a news release then they sell.

ETF Options Trading Strategies – Trading an ETF’s options is an excellent choice for those who prefer options trading over the actual ETF. ETF news traders find options useful as they trade an options strategy that can profit from the anticipated increase in volatility as a news release. One such option strategy is called a straddle were both a call option and a put option are purchased.

Certain ETFs have options that are extremely liquid. One such ETF is the QQQ where the volume of options traded daily is high.

Long-Term Trading Strategies – Some traders look to get in on a trend and ride that trend as long as possible. A long-term trader may stay in a trade for months or years looking to profit from straying in large trend. The mantra of the long-term trader is, “The trend is your friend”. Below is an example of a long-term  ETF chart.

Short-Term Trading Strategies – One things is certain about the markets and that is that it is dynamic. The short-term trader looks to take advantage of market moves that lasts anywhere from a few seconds to a few days.

Day Trading Strategies – ETFs can be successfully day traded as long as the ETF we have in mind has sufficient movement within a trading day. Day traders can enter trades at anytime during the day. They will always exit their trades at or before the end of the trading day. Some traders have become day traders because they wish to eliminate the risk of adverse overnight price movement.

High-Frequency Trading Strategies – These types of trading strategies can work well for ETF’s. High frequency traders can get in and out of trades in seconds or fractions of a second. Because the trading frequency the trades are executed by special high-frequency trading systems on powerful computers. This isn’t the type of trading done by the casual retail trader. In fact, a high-frequency trader will pay a premium to have their computers located as close to an exchanges data source as possible.

As you can see there are many different types of ETF trading strategies. We have just touched upon a few of the most common types as well as one exotic type (high-frequency trading strategies).