c15 JWBT016-Busby October 9, 2008 9:21 Printer: TBD
Stocks and ETFs 151I spend a great deal of time watching the markets, especially the equity
index futures, such as the S&P 500 and the Dow and Nasdaq futures. One
of the ways that I take advantage of this knowledge and information is by
trading stocks that tend to move in unison with one of the indexes. In that
way I am getting paid from two profit centers, the index and the stock.
When I trade stocks intraday, I look for shares that have a good average
trading range. I want the stock to move at least $1 in price during the aver-
age session. If it does not do so, I will not trade it because it will not offer
me the possibility to make money. Also, I want a stock that has good vol-
ume so that I can find a buyer for my shares when I want to liquidate them.
I am looking for a stock with two to three million shares trading every day.
Volatility is another important factor. I am looking for a beta around 2.0.
When all of these criteria are met, I look at the market. When going long, I
want the sector of which the stock is a part to be going in my direction. I
also want the overall market to be supporting my play.
In addition to trading stocks, I also trade ETFs. I trade them like stocks
because in many ways they act like equities and are traded like them. ETFs
are the wave of the future. They offer many advantages and allow traders
the diversity of a mutual fund as well as the flexibility and liquidity of
stocks.