Exchange Traded Fund (ETF) Trend-Following
First we identify investment classes − domestic equities, international equities, real estate, commodities, fixed income, cash and bear markets. For each investment class, corresponding ETFs are selected based on their costs and trading efficiencies.
Next, we collect historical price data for each ETF that is being considered for use. The price data is then converted to Simple Moving Averages (SMA) (average price over a specified period of time), ranging from 5 days to 200 days in length. Depending on the ETF being considered and the overall condition of the market for that ETF (rising or falling), a specific pair of moving averages is used to identify buy and sell points.
During periods of sustained rising price trends, we employ moving averages that consider longer timeframes, resulting in less trading activity and more market participation. During periods of sustained falling price trends, we employ moving averages that consider shorter timeframes, which increases sensitivity, resulting in higher trading activity and faster reaction times.
Our buy and sell discipline is designed to respond objectively to changes in the price trend of an ETF. The strategy seeks to invest exclusively in ETFs whose price trend is rising, while eliminating exposure to ETFs whose price trend is falling.