With Leveraged ETFs. With Leveraged ETFs STOCKS? We Don t Need No Stinking Stocks! Observe things how they are; See things how they can be!

With Leveraged ETFs Active Trend Trading: Dennis W. Wilborn With Leveraged ETFs STOCKS? We Don t Need No Stinking Stocks! Observe things how they are; See things how they can be!

Disclaimer U.S. Government Required Disclaimer Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don t trade with money you can t afford to lose. This is neither a solicitation nor an offer to Buy/Sell stocks, futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this training. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. All Materials presented are for training purposes only. Traders should paper trade any new method prior to risk of personal capital. Copyright ATTS 2007-2017

Our Motto: Clarify, Simplify & Multiply - Founder & Lead Technical Analyst for Active Trend Trading - Certified Candlestick Technician - Affiliate of Market Technician Associations - Guest Speaker on IBD How to Make Money in Stocks Radio Show - Highlighted in the book How to Make Money in Stocks-Success Stories - Publish Art & Science of Active Trend Trading Trader s Report Weekly - Host How to Make Money Trading Stocks Show Weekly - Systems Researcher - Former Forbes Contributor - Retired US Navy, Commander - Civil Engineer - Adjunct Professor MBA Program Chaminade University, Oahu, Hawaii - Started Trading in 1989 - Started Trading For a Living in 2006 - Research Colleague Mike Trager, Dallas, Texas

Compounding Effect 1. Take advantage of the Power of Compounding! 2. What is your Target Compounding Period? Yearly, Quarterly, Monthly The plans of the diligent leads to profit as surely as haste leads to poverty! ~~ Proverbs 21:5 Copyright ATTS 2007-2017

Reality of Trading 1. We all want to trade winners! 2. Searching for winning stocks is very time consuming 3. What we find may or may not be a winner! 4. If I choose from 4 stocks, I choose the one that goes up the least Even if you have a solid list of growth stocks, how big is the list? The Running List for 2017 is over 120 stocks so far. Do you really have the time to sort through 120 stocks on a daily basis? What can we do to hone in on some known winners that tend to repeat their winning ways every year? What are these entities? I believe for busy part-time and full-time traders having a fallback list of known winners will greatly reduce anxiety & increase the probability of trading success for the patient! Copyright ATTS 2007-2017

My Fallback List Leveraged ETFs 1. A small stable of Top Notch Leverage Bullish & Bearish ETFs makes up my Fallback List 2. Things I Prefer: Seasonality Does the ETF follow seasonal patterns Volume: >1M shares per day traded Weekly Options Are there multiple yearly moves of 10% or greater? 3. What is my list? 4. What can I expect? Copyright ATTS 2007-2017

The Challenges of ETFs 1. They are all derivatives of an underlying entity and thus reflect additional variables 2. Being Derivatives of Derivatives: Leveraged ETFs carry a higher level of variables due to daily requirements to achieve a certain daily return compared to the underlying and the requirement to rebalance 3. Leveraged ETFs have personality traits that can cause them to actually loose value even if the underlying increases in value 4. Counteract this trait by selecting solid leveraged ETFs that trade millions of shares per day 5. Counteract this trait by limiting hold period no more than 60-90 days 6. Counteract this trait by trading Leveraged ETFs that show sound technical patterns 7. Counteract this trait by limiting the number of Leveraged ETFs on the Watch List Copyright ATTS 2007-2017

Additional Facts 1. Leveraged ETFs seek to return 2x or 3x the Daily movement of the underlying entity 2. The derivatives held to provide the 2x or 3x daily movement are rebalanced or re-indexed 3. Rebalancing/Re-indexing can lead to slippage in the value of the leveraged ETF 4. This effect can be partially offset by limiting hold time and waiting for a strong trend to start. It is important to take each trade trigger, one never knows which entry = a Strong Trend 5. Being aware of Seasonal Tendencies can also help mitigate this trait Copyright ATTS 2007-2017

TNA-Daily 57% 23 Days 38% 14 Days 55% 25 Days

We Don t Need no Stinking Stocks! Thoughts & Questions 1. Patience 2. Seasonality 3. Solid Entry/Exit System with Alerts (ATTS) 4. Short Holding Periods 5. Compounding Factor Copyright ATTS 2007-2017

Leveraged ETFs Bonus Slides Vision is the art of Seeing Things Invisible! ~~ Jonathan Swift People Only See What They are Prepared to See ~~ Ralph Waldo Emerson Copyright ATTS 2007-2017

Leveraged Index ETF s Only? The plans of the diligent leads to profit as surely as haste leads to poverty! ~~ Proverbs 21:5 www.activetrendtrading.com Dennis W. Wilborn, Sr. dww@activetrendtrading.com

Leveraged ETFs Brief History of ETFs 1993 SPY 1999 QQQ 2000 IWM 2006 Leveraged & Inverse ETFs Today over 4,396 ETFs Globally Vision is the art of Seeing Things Invisible! ~~ Jonathan Swift People Only See What They are Prepared to See ~~ Ralph Waldo Emerson Copyright ATTS 2007-2017

Fallback List - What to Expect Gain from their Strengths - What to Expect Protection from their weakness Tracking Indexes SPXU SPX SPY SPXL or UPRO SQQQ NDX QQQ TQQQ TZA RUT IWM TNA Other Candidates Oil: SCO UCO Gold: DUST NUGT Financials: FAZ FAS BioTech: LABD LABU The plans of the diligent leads to profit Copyright 2007-2017 ATTS

Pros: - Highly Liquid - Seek 2x or 3x the daily move of the underlying Index - Trades like a stock - Don t have to be constantly searching for the next stock to trade - Seasonality - Compounding Pros Cons: - Compounding Cons - Lose Value over Long Periods due to derivatives traded to achieve 2x or 3x Leverage Especially with the Inverses - Does not follow underlying with precision Similar but not exact! (Trade off the underlying or the non-leveraged ETF) - Illiquid Options The plans of the diligent leads to profit Copyright 2007-2017 ATTS

Strengths & Weakness For Leveraged Index ETFs their Strengths and Weakness partially one and same 1. Provide a DAILY Return that is a certain multiple of the daily Index Move This can amplify losses 2. Derivatives necessary to achieve the double and triple returns can lead to contango/backwardation. Call it leakage Occasionally requires backward splits on the Inverse Leveraged ETF 3. Designed for short term trades 90 days or less (especially Inverse ETFs) Copyright 2007-2017 ATTS

Strengths & Weakness Daily Compounding Example To understand the math, consider a hypothetical index that rises 10% one day and falls 10% the next. If you earned exactly the index return in an unleveraged fund, a $100 investment would grow to $110 and then drop to $99, for a cumulative $1 loss. Now take a 2x leveraged fund: A 20% advance would bring you to $120; after a 20% drop, you would be left with $96. Over two days you have lost $4 instead of $1. Over months and years you can lose money in leveraged ETFs, even with a correct bet on the market's overall direction. So trade in short thrust Copyright 2007-2017 ATTS

TNA-Daily 57% 23 Days 38% 14 Days 55% 25 Days

NUGT 150% 52 Days 310% 46 Days

UCO 84% 38 Days

LABU 115% 38 Days

FAS 56% 30 Days

Leveraged Index ETF s Only? Part 2: Why s & How s The plans of the diligent leads to profit as surely as haste leads to poverty! ~~ Proverbs 21:5 www.activetrendtrading.com Dennis W. Wilborn, Sr. dww@activetrendtrading.com

Why s 1. Simplify research for working members 2. Good Technical Signals 3. No Earning Surprises 4. Trade like a Stock 5. Weekly Options on some provides alternative trading approaches 6. Big Move Potential Copyright 2007-2017 ATTS

How s 1. Patience, Diligence & Persistence 2. Apply ATTS Rules 3. Review Watch List Daily after the Market Closes 4. Use Weekly, Daily & Intraday Charts 5. Look and Wait for Indicator Extremes, plus divergences for best results 6. Identify which ETF is closest to a buy point 7. Define the triggers 8. Target Shooting OK with appropriate stops and Profit Targets Copyright 2007-2017 ATTS

Summary 1. Directional Bias 2. Designed for short term holding periods 90 days or less! 3. Patience, Diligence & Persistence 4. Apply ATTS Rules 5. Review Watch List Daily after the Market Closes Copyright 2007-2017 ATTS

Active Trend Trading ETFs We chose the ETFs based on several criteria including 1. Follows either the SPX, NDX or RUT 2. Follows select Commodities or Industries that demonstrate sound technical patterns and seasonality 3. Trade over a million shares per day 4. Would like each to also provide weekly options (not a requirement) Copyright ATTS 2007-2017

Active Trend Trading ETFs 1. Index Leveraged ETF s both Bullish and Bearish (Inverse) SPX: UPRO and SPXU NDX: TQQQ and SQQQ IWM: TNA and TZA 2. Industries or Sectors Financials XLF: FAS and FAZ Biotech IBB: LABU and LABD 3. Commodities Oil UCO and SCO Gold Miners GDX: NUGT and DUST Copyright ATTS 2007-2017

How to Trade the ETFs 1. Define planned exposure: 60% of trading capital equally split into 4 positions (1-2 IBD 50 and 2-4 Leveraged ETFs) 2. Follow sound ATTS entry criteria: support bounces, TSI Upticks, moving average bounce entries (second chance entries) 3. Entry Options: Enter ½ sized position on the first trigger 4. Exit Options: place stop at 5% or 0.25-0.50 below swing low adjust position size to never loose over 5%. Sell a portion of the position at 10%, make remaining shares breakeven 5. If price action pulls back to a new proper entry action point buy enough shares to make a full position. Use trailing stop based on 5 Objective exit training session Copyright ATTS 2007-2017

Seasonality Wait for It! Seasonality: Market Timing is based on short-term price patterns and trying to pick market tops and bottoms. - However, Seasonality is about anticipating how the market will behave in a given time of year and taking a position before the change occurs. - Seasonality appears in stocks, commodities, nature, etc. - By understanding the ebbs and flow of Seasonality, traders can better position themselves to take advantage of buying & selling opportunities Remember: Seasonality reflects a tendency and each year is different Trade the Charts! Copyright ATTS 2007-2016

Oil Seasonality

SPX Seasonality

NDX Seasonality

RUT Seasonality

TNA-Daily 57% 23 Days 38% 14 Days 55% 25 Days

Gold Seasonality

NUGT 150% 52 Days 310% 46 Days

Oil Seasonality

UCO 84% 38 Days

Biotech Seasonality

LABU 115% 38 Days

Financials Seasonality

FAS 56% 30 Days

5 Objective Profit Exits - Profit Exits can be planned based on several objective parameters. - Profit Exit parameters can be used in combination 5 Objective Profit Exits - Set Percentage, Fib Extensions, Symmetry Extensions, Keltner or Moving Average Extensions Set Percentage: 5%, 10%, 15%, 20% from Entry 10 % Copyright ATTS 2007-2017

5 Objective Profit Exits - Profit Exits can be planned based on several objective parameters. - Profit Exit parameters can be used in combination 5 Objective Profit Exits - Set Percentage, Fib Extensions, Symmetry Extensions, Keltner or Moving Average Extensions - Pivot High/Low Uptrend at each place a trailing stop slightly below a new swing low Copyright ATTS 2007-2017

5 Objective Profit Exits - Profit Exits can be planned based on several objective parameters. - Profit Exit parameters can be used in combination 5 Objective Profit Exits - Set Percentage, Fib Extensions, Symmetry Extensions, Keltner or Moving Average Extensions - Pivot High/Low - 8 Period Moving Average Entry Close below the 8 period EMA or a violation of the low of a close below the 8 period EMA Copyright ATTS 2007-2017

5 Objective Profit Exits - Profit Exits can be planned based on several objective parameters. Cross Down Take partial profit Cross Up - Take price low of that day as new trailing stop - Profit Exit parameters can be used in combination 5 Objective Profit Exits - Set Percentage, Fib Extensions, Symmetry Extensions, Keltner or Moving Average Extensions - Pivot High/Low - 8 Period Moving Average - TSI Copyright ATTS 2007-2017

5 Objective Profit Exits - Profit Exits can be planned based on several objective parameters. - Profit Exit parameters can be used in combination 5 Objective Profit Exits - Set Percentage, Fib Extensions, Symmetry Extensions, Keltner or Moving Average Extensions - Pivot High/Low - 8 Period Moving Average - TSI Engulfing Candlesticks: Close at end of period or next period on a violation of the low of the engulfing pattern - Engulfing Candlesticks Copyright ATTS 2007-2017

5 Objective Profit Exits - Summary 5 Objective Profit Exits - Set Percentage, Fib Extensions, Symmetry Extensions, Keltner or Moving Average Extensions - Pivot High/Low - 8 Period Moving Average - TSI - Engulfing Candlesticks Copyright ATTS 2007-2017

ATTS Objectives: Provide a clear & simple trading systems for busy people! So they can become Wise, Profitable and Winning Traders! 1. Active Trend Trading Membership: $54.99 per month but you save 40% limit time: $32.99 2. Early Warning Alerts for Index ETFs: Yearly membership $999 limited time: $399.00/Year Save more than 60% For Webinar attendees go here for a special membership offer: http://activetrendtrading.com/monthly-membership-introduction/