Finding the Best ETFs to Trade

Today I have decided to find a set of highly liquid leveraged ETFs using StockScreen123.   This is quite an easy task as shown below.

The above screen has two rules.  The first rule "ETFMethod = LEVSHORT or ETFMethod = LEVLONG" indicates that I only want leveraged (long or short) ETFs to be selected for my screen.

The second rule "AvgDailyTot(63) > 5000000" is a liquidity rule.  This rule selects only ETFs that have a three month (63 day) average of daily dollar-volume of $5M.  In other words, $5M worth of shares are traded daily on average.

Now by clicking on the RUN button, the screen calculates and displays the results.  46 ETFs meet my criteria.

Now I've decided that there are too many to sort through so I am going to look at specific sectors and choose from there.  This requires a third rule.  The third rule is "ETFSector = xxxxx" as shown below.

 

 By clicking on the full description you can see all of the sectors. 

As it turns out, only a few of the sectors have ETFs with a high level of liquidity.  From those I tried to select ETFs that have been around the longest (i.e. ProShares over Direxion) and relatively well diversified from each other.  I ended up with the list below as a starting point.

 

Now I can create a one rule screen that holds these ETFs in equal dollar value as shown below.

 

Now let's backtest this screen using monthly rebalance.

As can be seen from this graph there was a 45% loss over two years.  This amounts to a profit when short selling the ETFs.  Next post I'll do some further evaluation of this screen.

Take care,

Happy trading

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