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Jim Trippon is a certified genius, a member of MENSA, and the epitome of the “Overachieving Entrepreneur.” He’s an internationally renowned and globally experienced investment expert, dedicated to finding undervalued, “under the radar” investments for his worldwide clients and subscribers. He... More
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  • Only ETF Fools Rush In 1 comment
    Mar 10, 2011 8:41 AM | about stocks: DBO, EGPT, AND
    Due to the recent geopolitical events in the Middle East and the subsequent impact on plenty of ETFs, now is as good of a time as any to rehash perhaps one of the most important rules of trading and investing. That being: Emotional control. Perhaps you've heard the expressions "don't let a trade turn into an investment" and something along the lines of not becoming married to a losing investment to the point where losses are starting to pile up.

    Both adages are worth remembering and they are relevant to my own personal addendum, which is "Only ETF Fools Rush." Obviously, I'm biased because I'm the one dispensing the advice, but I think it is particularly relevant given all the calamity in the Middle East and the impact those events are having on an array of ETFs.

    Many ETFs by their very nature can prove to be event-driven instruments. In terms of recent events, we've seen this with country-specific funds and at the sector level, we've seen this scenario play out with oil ETFs. Here two examples, one real and one hypothetical about why it pays to wait on certain ETF trades.

    On Monday night, oil futures were trading lower in the electronic trading session. A look at the chart for West Texas Intermediate Crude showed the April contract was close to dipping into a previous technical channel and giving back some of its recent gains. That would indicate it was a good idea to short oil, but had you rushed into that trade Tuesday morning using the PowerShares DB Crude Oil Double Short ETN (NYSE: DBO), you would have absorbed a loss of more than 5% in just one day because oil prices moved higher on Tuesday.

    Here's a hypothetical example, but I get the feeling it's going to prove accurate. The Market Vectors Egypt ETF (NYSE: EGPT) is currently trading above its net asset value, perhaps bid up in anticipation of Egypt's stock market reopening on Wednesday. Rushing into EGPT before Egyptian stocks start trading again could prove extremely foolhardy. Why? No one has a crystal ball to show how Egyptian equities are going to perform this week, next week, etc. If those stocks open down, EGPT is going to get smacked. Just look at how volatile this ETF has been recently. Do you really want a piece of it on the first day Egypt's major exchange is open for business after a layoff?

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    The lesson of rushing in is one I also applied in a previous post about new ETFs and with some exciting new ETFs recently making their debuts, it is worth remembering that we don't need to be among the first to own these funds. Personally, I'm intrigued by the new Global X FTSE Andean 40 ETF (NYSE: AND), which is the first ETF to offer simultaneous exposure to Chile, Colombia and Peru.

    If this was June 2010, I probably would own this ETF right now and would probably have it in the ETF Profit Report portfolio. However, times change, and emerging markets have lost considerable luster in early 2011. I think that will change for the better later this year, but the point is we don't need to own AND now when we can probably get a better entry point in a few weeks.

    Sometimes waiting things out with ETFs is your best and most profitable move.

    Click HERE to learn more about the ETF Profit Report - An ETF Trading Service For Serious ETF Investors
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    Stocks: DBO, EGPT, AND
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  • golfitobob
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    Comments (2346) | Send Message
    Hey I just saw this as I was trying to learn to find a way to buy oil after this recent pull back.........


    I see that your ETF plug has Peru an Colombia as partners to China.
    Peru has it's problems, politically as well, and the US Congress just through up another road block to the trade agreement which stops the Colombians from free trade with the US. Yes they can deal with China,but,


    Are you still happy with that ETF ?


    Why not the Oil ETFs......


    I see the chance of 5% gone quickly ,but, if your going to use that example......... What must you compare the trade too. Trading contracts in the future market ? If so, then ,compare paying to get in and out there an if you could lose more than 5% easily. The ETF.... In an out would be anywhere from free or $ 4.00, 7.00 or even up to $ 9.95.


    I have traded futures ( options) maybe 3 times in 50 years . As I see from your article an the others I am reading ,to learn this stuff, say that ETFs are a inexpensive way to be involved. And, if you get the direction right your gains in ETF(s) the are a pure gain. One of the above mentioned price an your out. About 99% is all yours. Future commission's can be much higher monies.


    Thanx for your posting. It was helpful in me learning to fiddle with a way to do the oil moves. I did buy an sell SZO for 2 nice trades ,but, it is a pink sheet stock ( why ???? ) and the volume is tiny . Often you have no buyers during the day and you wait until 3:55 pm an see if there is a clear direction an someone hits your trade.


    I will try an oil ETC because this little dollar boost an commodity sell off might be a great entry point for dozens of commodities Oil seems easy and the Saudi needing 85 bucks to break even seems to say oil might not go way higher ,but, where near a permanent floor. An old inflation is with us too. The world is speeding up despite the US economy an dollar.


    Just my 2 cents throw in.
    bueno suerte


    Thanx again.................... suerte
    18 May 2011, 06:25 AM Reply Like
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