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ETF Core Strategies

Aim: To trend-trade general equity ETFs so as to ride rallies and buck busts in the Australian share market.

ETF Rotation Strategies

Aim: To back the local and foreign sector ETFs with the strongest price gains over both short and long terms.

Glossary

Listed below are definitions for key terms used frequently by MarketTiming:

Term Definition   
All Ordinaries Index A stock market index comprising the shares of over 300 companies listed on the Australian Securities Exchange (ASX) weighted by their market value and turnover. The All-Ordinaries Index is the most quoted benchmark for Australian equities. The ASX is responsible for calculating and distributing the index and its returns.
Back-testing means the process of testing how a particular investment strategy would have performed if it had been applied during past periods and market conditions; the primary benefit of back-testing lies in understanding the vulnerabilities of a strategy as it encounter real-world conditions of the past; it cannot predict how a strategy will perform under future conditions
Bear market means a period of time involving widespread investor fear and pessimism
Bull market means a period of time involving high (and increasing) investor confidence, and increased investing in anticipation of future price increases and capital gains
Buy signal means a market timing signal that flags when it is opportune to enter the share market via the purchase of an exchange traded fund
Buy & hold means buying and holding an investment (e.g. indexed share fund) for an indefinite period regardless of market conditions. It is the antithesis of the concept of market timing which attempts to increase investment returns by avoiding the worst of market corrections and crashes.
Conservative Strategy means MarketTiming’s medium term share market timing strategy, involving 1-3 signals a year
Days mean weekdays (that is, normal trading days)
Drawdown means any decline or reduction (“loss”) in the value of an investor’s equity or capital invested
Enter (the share market) means to purchase/buy an exchange traded equity
Enter-exit trade(s)  means a transaction in which an investor first buys a security such as an ETF and then later sells it hopefully to lock in a profit
Equity curve means a line or bar chart showing rises and falls in the value of an investor’s equity (or capital employed) over time
Exchange Traded Funds (ETFs) means an investment vehicle traded on stock exchanges at approximately the same price as the net asset value of its underlying assets over the course of the trading day; most ETFs track an index, such as the S&P/ASX 200
Exit (the share market) means to sell shares
Exit/enter transaction means a transaction in which an investor sells out of a security and later repurchases that security hopefully at a lower price
Fundamental analysis means that branch of security analysis which involves analyzing a company’s financial statements and health, its management and competitive advantages, and its competitors and markets
‘In’ the market means entering and remaining in the share market, on the grounds that it is opportune to be exposed to positive sentiment and the potential for capital gains
Long trade(s) in relation to a security (such as a share or a bond), means owning a security in the expectation that a profit will be made as the price of the security goes up
Market timing means the strategy of making ‘buy’ or ‘sell’ decisions in the share market with the aim of selling (or going short) at market highs and buying (or going long) at market lows
MarketTiming means Market Timing Pty Ltd (ABN: 63 135 540 135; Australian Financial Services License No: 340958)
‘Out’ of the market means exiting and remaining outside the share market, on the grounds that it is opportune to avoid exposure to negative market sentiment and uncertainty, and the potential for capital losses
Ranging (or sideways) market means a market where price movements are within a range that shows no significant upward or downward movement; trading ranges (or sideways trends) occur when peaks and troughs appear roughly at similar levels
Risk in the context of share market investments, means the probability that an investment’s actual return will be different than expected either positively or negatively; involves the unexpected variability or volatility of returns and thus includes both potential worse-than-expected as well as better-than-expected returns
Sell signal means a market timing signal flagging when it is opportune to exit the share market via the sale of shares
Sharpe ratio means the ratio between an investment’s average return and the investment’s risk (as measured by its standard deviation)
Short selling means the practice of selling assets, usually securities, that have been borrowed from a third party (usually a broker) with the intention of buying identical assets back at a later date to return to the lender; a short seller hopes to profit from a decline in the investment’s price between the sale and the repurchase, as less will be paid to buy the assets than is received on selling them; also known as ‘shorting’ or ‘going short’.  MarketTiming does not recommend short selling because it magnifies the risk of trading.
Signal in a market timing context, means an indication that share market conditions are such that it is appropriate to consider either entering or exiting that market
Slippage means the extent of the delay (often measured in number of days) between when a change of signal first arises and when an investor acts upon that change of signal
Standard deviation is a statistical measure of how much variation there is in a data set from the “average” (mean) for that data set; it is a widely used measure of the variability or dispersion of a data set
Technical analysis means that branch of security analysis which involves assessing the likely future direction of prices through the study of past market data, primarily price and volume data.  Technical analysis has two branches; “trend-following” and “pattern analysis”.  MarketTiming only practices the former.
Trailing stop means a moving or trailing activation price, involving a pre-set percentage change or actual specific amount of rise (or fall) in a security’s price; trailing stop sell limits are used to maximize and protect profit as a share’s price rises and limit losses when its price falls; trailing stop buy limits are used to maximize profit when a share’s price is falling and limit losses when it is rising
Trend following means an investment strategy that does not aim to forecast or predict markets or price levels, but instead simply waits for a trend to appear and then “rides” that trend if it’s positive and sidesteps or short trades it if it’s negative
Trending market means the prevailing course or tendency in the share market involves a clear movement in a particular direction over time; successive peaks and troughs are higher and higher (for an uptrend) or lower and lower (for a downtrend)
Whipsaw means a false signal, being a market timing transaction that results in a loss as a result of the signal being generated as a security’s price heads in one direction, only to be followed shortly after by a movement in the opposite direction; such reversals can take place up to 40 weekdays (or two months) after the market timing signal

ETF Core Strategies

Aim: To trend-trade general equity ETFs so as to ride rallies and buck busts in the Australian share market.

ETF Rotation Strategies

Aim: To back the local and foreign sector ETFs with the strongest price gains over both short and long terms.

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