They're extremely popular too. Yet despite their popularity, the leveraged and inverse ETF space is surrounded by controversy.

Many believe these products should be outright banned due to their volatile nature. Some even consider them tools for gamblers, as they point to the tremendous losses that some of these products have seen.

To be sure, the unsavory reputation that leveraged and inverse ETFs have received isn't completely unwarranted. The aforementioned UWTI and NUGT are both down more than But that doesn't mean they haven't done exactly what they were designed to do, which is provide 3x-daily leveraged exposure to the indexes they track. This is a bet that oil and gold will go up.

SEC reconsiders quadruple-leveraged ETF - Intercontinental Exchange, Inc. (NYSE:ICE) | Seeking Alpha

For UWTI, that means 3x exposure to front-month crude oil futures, and for NUGT, it means 3x exposure to a basket of gold miner equities. Over longer-term periods, the pattern of returns between the index and the products can deviate significantly due to the effects of daily rebalancing. That translates to a two-day loss of 5. For ETPs tied to volatile flat-to-down-trending areas of the market—such as oil and other commodities—this rebalancing effect has a detrimental effect on returns over time.

For very-short-term traders, that's not a concern.

They can use these ETPs to trade in and out of the market in an attempt to capture quick gains that will be close to 3x the index. It's the longer-term and retail traders—who often don't know how these products work—who end up disappointed or devastated. Does that mean these products should be banned?

Holy Grail Leveraged ETFs Trading Strategy for Investors

In any case, more investor education is needed, particularly for retail investors who are heavy users of leveraged and inverse ETPs. All Asset Classes Alternatives Asset Allocation Commodities Currency Equity Fixed Income Region: All Regions Asia-Pacific Developed Markets Emerging Markets Europe Frontier Markets Global Global Ex-U.

4 Tips for How to Trade Leveraged ETFs with the Directional Movement Index - Tradingsim

Greece Hong Kong India Indonesia Ireland Israel Italy Japan Latin America Malaysia Mexico Netherlands New York New Zealand Nigeria Nordic North America Norway Pakistan Peru Philippines Poland Portugal Qatar Russia Saudi Arabia Singapore South Africa South Korea Southeast Asia Spain Sweden Switzerland Taiwan Thailand Turkey U. United Arab Emirates Vietnam Category: Skip to main content. How To Trade Leveraged ETFs March 24, Leveraged and inverse ETFs are prolific.

ETF Database: The Original & Comprehensive Guide to ETFs

Out of the more than 1, U. Find your next ETF Asset Class: All Asset Classes Alternatives Asset Allocation Commodities Currency Equity Fixed Income. United Arab Emirates Vietnam. View the discussion thread.

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