Advanced ETF Trading Strategies for a Solid Portfolio

If you're an experienced investor and you've grown your portfolio, chances are you're on the lookout for new ways to expand. Maybe you want to enter new sectors, diversify, or find different ways to trade.

Either way, advanced strategies for trading ETFs (exchange-traded funds) serve many purposes that go beyond simply making a potential profit. However, they are not without high risks.

Let's look at four well-known ETF trading strategies and what you need to know.

Advanced ETF Trading Strategies

1. Short Trading
2. Investment Allocation
3. Swing Trading
4. Sector Rotation

1. Short Trading

Ultimately, the objective is to speculate and potentially profit from a decline in the instrument price.

Investors use this strategy if they think that a stock price is too high and unjustified. Typically only more experienced traders dabble with the short-trading strategy because:

1. There is no limit to potential losses
2. There is a possibility of a short squeeze, when investors are forced to close positions because of prices consistently increasing.

For example for short trading, let's say that an investor thinks Acme International is overpriced at $100 and believes it will fall in the next two months to $40. So they will borrow Acme shares and sell them to another investor. Should shares fall, the investor will take them again and turn a potential profit.

» This is how long you can hold a short position in stock trading