Udow trend signals

I trade this system and have done very well with it. However i know some people say they will not trade ETF’s . Can someone explain to me any dangers that exist trading this ETF-UDOW. I just want to make sure i understand moving forward. Please i am not asking for comments on this strategy leader just what he trades. Thank you for any education you can provide for me.

UDOW is 3X ETF.
Leveraged bet.
Good side is that if you got right direction, you can make nice money.
Bad sides are that all those 3X ETFs are designed to lose in value over time.
It is due to their structure. They are best used only for daytrade, not swing trade.
I respect nice gains that mentioned system made.
But; it holds UDOW for long periods of time, average being around 20 days.
Bigger problem is that those ETF; 3X; they use futures, options, swaps to make that 3X return of underlying instument. Be it GDX for DUST/NUGT; UNG for UGAZ/DGAZ…
Also they are rebalanced daily. They will not, over let’s say 12 months be 3X of what DJ-30 made.

Please look at values of GDX and NUGT over last 6 years. NUGT is 3X long ETF on GDX.
NUGT never traded at those 4 number values, that were splits. But loss of vaule over long term is huge.

Better thing is to short those ETF; but that is also risky bussines, and need really good timing
and tight SL.

NUGT is a bit of extreme example. But if one day bear market hits, and developers are
long only on 3X ETFs, you can expect same thing happening.
Hope this helps.

I wouldn’t say “dangers”, although I’m sure there will be a reckoning with all the index ETF money someday, but I’ll point out the “bleed” of these things.
This is a 300% (3x) daily ETF. So if the DJ30 is up 1%, this will be up 3% - I stress DAILY.

This is great in quiet, up or down-trending markets. You actually get more bang for your buck. For example (and sake of argument), lets sat the DJ30 is up 2% every day for 10 days. At the end of the 10 days the index is up 10.5%. You’d expect the 3x ETF to be up 31.5%, but it is actually up 34.4%. Hooray!!! It works just as well on the downside too. yay.

However, in volatile markets, where, lets say the index is +2%, then -2% back and forth for 10 days, the DJ30 is down -0.2%, and the 3x ETF is down -1.8% (more than 3x). Since markets are never nice and easy (despite 2017…) multiply this by many weeks, months, years and you’ll get significant drag, and nowhere near the “3x” performance you’d expect. You even can lose when the market is up over longer periods.

Now this strategy is not buy and hold, so he is obviously just trying to time the market. But he does hold for long times with some trades, and he also uses additional leverage on top of this thing, AND made a horrible trade that got him a margin call earlier this month. ouch.

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