I have this software that analyzes EOD ETFs and some stocks. Giving prediction for possible trades at the opening of the next day. It has worked well and generated some profits. So I got over-confident. The system kicked out a great looking prediction for an EFT. UWT. Which is a leveraged ETF long on crude oil. Mistake #1. Long on crude middle of March 2020? Nuts. But I went ahead. On a reasonable amount. Day 1 looked good. Day 2 the oil crashed big times and red ink was flowing. Mistake #2 – I should have cashed out the little profit I had on day 1 (as per the strategy).
Oil prices dumped so much that any reasonable person would think that it will recover.
At least enough not to bleed too much. So I kept the position and was prepared to wait until it recovered.
Now comes the end of March and the EFT tanked. BUT – the oil prices went up! This ETF is a 3x leveraged one and should shoot up. But it went down? Here is mistake#3: The ETF was to expire April 3. So it died. When it expired, I got $0.14 back/share. Which was about 1% of my investment for this product. My balance was now pretty well where it was 10 months ago. All my great trading profits wiped out.
Lessons learned from this were many. As for ETFs – the important take-away from this is research them. Know if they expire anytime soon. And stick to your strategies. And maybe consider taking profits earlier than normal, any profit is good profit.
Trading is not for everyone. I love it and aside from making the odd profit is a passion.