FAQ

Welcome to the Frequently Asked Questions (FAQ page). Below, we have tried to answer the most common questions visitors to our Web site may have. If you find that your question is not answered on this page, please e-mail us.

What, in general is the Disciplined ETF Trading Model?

Disciplined ETF Trading uses a mathematical model to analyze every ETF on all US Stock markets. A more detailed description is available in Model Details.  The model has worked well in advancing and declining markets. 

Why should I choose Disciplined ETF Trading?

You should choose Disciplined ETF Trading because it has generated superior investment returns in both up or down markets. You won’t have to worry about a market crash.  You won’t have to constantly keep up with individual stocks or the market in general. You will no longer be uncertain of what to do. The alerts are clear and any questions you may have will be promptly answered.  You should choose Disciplined ETF Trading if you want a good chance at a better financial standing for you and your family.

Why should I not choose Disciplined ETF Trading?

If you are completely new to buying and selling stocks and are unwilling to educate yourself and to start off slowly, then this is not for you.  If you cannot spend 10 minutes a week on your investment, then this is also not for you.  If you are strictly a buy-and-hold investor in both up and down markets, then Disciplined ETF Trading is not for you.

Do you offer Autotrading?

Yes we do. Currently, Disciplined ETF Trading has four brokerages that autotrade our alerts: OptionsXpress, SpeedTrader.com,  Thinkorswim or TradeKing.  Our subscribers who prefer a near completely hands off approach have been very happy with it. Please let us know if there is a brokerage that you would like us to add.
 

Are there any special brokerage requirements that I must have?

Disciplined ETF will work in both cash (IRA) and margin accounts.  Your brokerage should be a discount brokerage so that commissions play a small role in your returns.  For Autotrading brokerages, ThinkorSwim.com and Speedtrader.com have good commission schedules.

For those who prefer mutual funds, ProFunds Investment funds can be used in most picks. They can be traded with no transaction costs. 

How much money do I need to commit in order to be successful?

This depends solely on the cost of commissions relative to the amount that you are trading. Commission cost can be zero if trading mutual funds or trading ETFs at the zero commission brokerage Zecco.  Etrade allows a minimum of $2500 to trade Rydex funds with zero transaction costs in a traditional account and $1000 in an IRA account. The minimum amount to open an account at Zecco is $2500. Using a deep discount brokerage such as MB Trading as another benchmark, Disciplined ETF Trading will work well with as little as $5000.  Other brokerages with higher commission rates will require larger amounts of capital.

Can the model results be achieved?

Yes, real returns can be very close to the model returns. Brokerage fees and margin interest (small, but definitely negative) have not been factored into the model. Neither have money market dividends been factored into the results (positive, but very small). Brokerage fee rates are the primary factor that could cause underperformance.  Please consider the percentage of each trade that is taken up by commissions for your particular brokerage.

What time of day do I have to place the trades?

The alerts are issued on the weekend.  If the alert calls for a trade, the trade can be made the next day. Trades can be made anytime during the trading day. If the market gaps up or down on Monday morning it is prudent to wait until the market settles down a bit (10:00 or 10:30 AM EST). 

If you are trading with mutual funds, the trade can be entered on Monday and take effect at the end of day on Monday.

I have been trading with Disciplined ETF Trading for almost a month and I have yet to turn a profit.

The shortest period over which we judge performance is 40 trading days (approximately 2 months).  Each year since 1998 has seen one 2 month period for which the returns are negative (usually between negative 0 and 10%). Stick with it and your returns should turn positive. The median return over the 2 month periods is 13.65% and the average return is 21.1% (skewed by the large 2000 returns). Two month returns of 13.65% would result in a yearly return of 115%.

How long has this method been traded?

This methodology was used to pick individual stocks starting back in 1994 and was very successful for our founder in generating wealth.  However, it wasn’t suitable for subscribers in general because of the number of picks needed to achieve diversification and not be subject to a large decline in a portfolio due to one bad pick.  With the proliferation of ETFs, we can now offer this to subscribers without the fear of one company “blow-up” dramatically harming a portfolio. 

We began beta testing our service with some of our Disciplined QQQ Trading subscribers in July 2008 and achieved excellent returns even through the crash of Fall 2008. This was done with a balance of longs and short ETFs. Our short ETFs increased quicker than our long ETFs declined. During bull markets the reverse has been true. There is always a bull and bear market somewhere. 

Do you expect that the high returns will continue in the future?

Yes, we expect to continue to beat the market returns. In a raging bull market our returns may be near  or slightly below market returns because we take a balanced approach in our portfolio. In a flat or declining market we expect to significantly outperform the market.

Can I use Disciplined ETF Trading with an IRA account?

Yes. We do not directly short ETFs. We do take long positions in inverse ETFs in order to mimic shorting a sector.  For many brokerages, stetlement day restrictions can limit the amount of cash to invest at any one time.  Our autotrading brokerages do not have face this restriction. For those who trade manually, Interactive brokerages have margin-like IRA account that doesn’t allow borrowing, but it elliminates any issues with settlement days.

Trading ProFunds is another option that works because there are no issues with settlement days and there are no transaction fees either.

How often do you change positions?

That will vary depending on the market conditions. Our alerts our sent out weekly and typically there are no alerts during the week. We typically have a maximum of four positions at any one time and we tend to hold positions for multiple weeks. During volatile times, our average holding period may only be one week.  During more normal times, it will be longer.

If Disciplined ETF Trading is so good, why bother setting this up as a business if you are getting such excellent returns?

There are a few reasons. The first is that my returns are better when I have the extra responsibility of creating good returns for subscribers. The added motivation to achieve good returns for subscribers is helpful in model development and implementation (automation). Secondly, I also like running my own business because it is a challenge and it offers me some tax advantages.  Friends to whom I had been giving buy and sell signals had encouraged me to set up a business.  Thirdly, I honestly enjoy helping people out. If I can help some other “little” guy make ends meet or let him/her work less and spend more time with family, then it is well worth the effort in setting this up.

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Disciplined ETF Trading is a service provided by Zarsby LLC

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