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This is the second in a series of posts that will track a portfolio of ETFs.

The Rules

One thing that I overlooked in my introductory post is the rules that I will use to trade this portion of my account.

If one is going to start a forward test, one needs to spell out the rules carefully in case some of you "want to play along at home". My younger brother used to change the rules in the middle of a game when we were young. It drove me nuts. So let's keep them simple and stick to them.

Money

  1. Since we are targeting three ETFs, I will start with US$30,000.
  2. I will be trying to buy roundish lots, so there will be cash left over.
  3. I will include the cash in the calculations because this exercise should be as close to reality as possible.

Holding Cash

If only two of the ETFs show positive ratings, we will hold two positions and keep roughly one third of the portfolio in cash. If only one breaks into positive numbers, two thirds in cash. And if all twenty are in negative territory, we will make like 2008 and go all cash.

Trading

  1. We will take the readings from the System on the Friday close for the three top ranked ETFs.
  2. I will then place orders, as recommended by the System, to be executed on Monday close.

Disclosure: Just so we are clear from a disclosure point of view, I will be trading this in my online account. Since it is only US$30,000 total, I do not anticipate any big market moves on Monday afternoons, however.

Reporting

I will update this post on SA on Tuesday with a quick accounting and, as room allows, some observations about the various ETFs that we have selected for this account.

How Long?

Initially, I was thinking about a year. We'll see if anyone is still interested after that.

I want to thank everyone who made comments and offered suggestions. I fired off some quick responses but some of the issues deserve more in depth treatment which I will do in subsequent postings. So, if you notice a bit of repetition, my apologies in advance.

Disclosure: I own EWH, EPI and TUR. I also have a small position in DBA in another account.

Source: My ETF Portfolio: Chapter 1, The Rules