Vitalie Ciobanu

Data Analyst as a Service

Author: Vitalie Ciobanu

  • Testing the “Trade the Trend” Strategy with Sector SPDR ETFs

    Testing the “Trade the Trend” Strategy with Sector SPDR ETFs

    I’ve been toying with an idea for a while now, and I finally decided to put it to the test. My curiosity revolves around the “trade the trend” strategy, specifically by following Sector SPDR ETFs.

    For those unfamiliar, the “trade the trend” strategy is a trading approach that involves identifying and capitalizing on prevailing market trends. As described by HowToTrade.com, this strategy relies on spotting the direction in which a market is moving and making trades that align with that trend. The goal is to ride the trend for as long as possible to maximize profit.

    However, I wanted to add a twist to this strategy. Imagine we’re in a bull market, a period during which prices of securities or assets are rising or expected to rise. In simpler terms, everyone is saying the stocks are going up. My idea is to rank the ETFs by their performance in the previous month and invest a weighted amount in each sector.

    The weight ratio by grand total is a formula used to express the proportion of a part relative to the grand total. It is calculated by dividing the weight of the part by the grand total weight, then multiplying by 100 to get a percentage. This shows how significant each part is within the whole.

    Let’s see an example of weighting with a grand total investment of 1,000:

    • Company A – 100
    • Company B – 150
    • Company C – 50
    • Company D – 250
    • Company E – 450

    Grand Total Investment = 100 + 150 + 50 + 250 + 450 = 1,000.

    Now, to compute the weight ratios for each company:

    • Company A: Weight Ratio = (100/1,000) × 100 = 10%
    • Company B: Weight Ratio = (150/1,000) × 100 = 15%
    • Company C: Weight Ratio = (50/1,000) × 100 = 5%
    • Company D: Weight Ratio = (250/1,000) × 100 = 25%
    • Company E: Weight Ratio = (450/1,000) × 100 = 45%

    What this means is that from the monthly available amount, 10% of it will be invested in Company A, 15% in Company B, 5% in Company C, 25% in Company D, and 45% in Company E.

    Every month, the rank will be recalculated, and specific amounts from the monthly available amount will again be invested according to the calculated weight based on the performance of each ETF in the previous month.

    Now, let’s see a real world example with the Sector SPDR ETFs.

    According to SPDR page, December 31, 2024, monthly performance for each sector is detailed below:

    After working some magic with Power Query, I generated the ranking below. Keep in mind: lower ranks indicate poorer performance.

    SymbolSector1 MonthRankRatio of grand total
    XLBMaterials-10.79%11.52%
    XLEEnergy-9.54%23.03%
    XLREReal Estate-8.60%34.55%
    XLIIndustrials-7.96%46.06%
    XLUUtilities-7.93%57.58%
    XLVHealth Care-6.20%69.09%
    XLFFinancials-5.44%710.61%
    XLPConsumer Staples-4.81%812.12%
    XLCCommunication Services-1.38%913.64%
    XLKTechnology-0.34%1015.15%
    XLYConsumer Discretionary1.13%1116.67%

    Given the table, we need to allocate 16.67% of our available funds into the XLY ETF (Consumer Discretionary) and 1.52% into the XLB ETF (Basic Materials), and similarly for each sector.

    If we have 1,000 to invest this month, the distribution would match the percentages listed in the final column:

    SymbolSectorRatio of grand totalMonthly investment
    XLBMaterials1.52%                                     15.15
    XLEEnergy3.03%                                     30.30
    XLREReal Estate4.55%                                     45.45
    XLIIndustrials6.06%                                     60.61
    XLUUtilities7.58%                                     75.76
    XLVHealth Care9.09%                                     90.91
    XLFFinancials10.61%                                  106.06
    XLPConsumer Staples12.12%                                  121.21
    XLCCommunication Services13.64%                                  136.36
    XLKTechnology15.15%                                  151.52
    XLYConsumer Discretionary16.67%                                  166.67

    For this test, my focus is on the long-term performance of this investment strategy. I’ll be disregarding recent events like the fake Santa rally, new presidency, and the past two years of high returns, starting with data from December 2024 only.

    My plan is to conduct this exercise every month, investing 1,000 each time using my Demo account in Interactive Brokers broker. I’ll be sharing monthly blog updates on the progress. As for the duration of this test – I’m not sure yet, I will let the Universe decide this 🙂

    So here’s the January test investment of $1,000 into the 11 sectors:

    SymbolDate/TimeTypeQuantityPriceInvestedCommission
    XLB2025-01-23, 09:30:00BUY0.170688.78-15.15-0.15
    XLC2025-01-23, 09:30:00BUY1.382198.6572354-136.35-1
    XLE2025-01-23, 09:30:00BUY0.327392.5500092-30.29-0.3
    XLF2025-01-23, 09:30:00BUY2.100150.5009533-106.06-1
    XLI2025-01-23, 09:30:00BUY0.429141.26-60.6-0.61
    XLK2025-01-23, 09:30:00BUY0.6323239.62-151.51-1
    XLP2025-01-23, 09:30:01BUY1.572577.08-121.21-1
    XLRE2025-01-23, 09:30:00BUY1.101941.2453762-45.45-0.45
    XLU2025-01-23, 09:30:00BUY0.963478.63-75.75-0.76
    XLV2025-01-23, 09:30:00BUY0.6372142.649997-90.9-0.91
    XLY2025-01-23, 09:30:10BUY0.7251229.83-166.65-1

  • Investing vs. Trading. Understanding the basics.

    Investing vs. Trading. Understanding the basics.

    When it comes to building wealth and managing your finances, there are two common strategies that can be confusing for some people – investing and trading. While they may seem similar at first glance, they have distinct differences and use cases.

    What is investing?

    Investing is the process of purchasing assets with the goal of long-term growth. This strategy focuses on holding assets for an extended period, often years or decades. The idea is to build wealth gradually through the appreciation of these assets and, in some cases, earn income from them (like dividends or interest).

    Types of investments:

    • Stocks: Buying shares of a company, which represent a portion of ownership. Over time, as the company grows and becomes more profitable, the value of these shares typically increases.
    • Mutual Funds: Pooled funds managed by professionals that invest in a diverse portfolio of stocks, bonds, or other securities.
    • ETFs (Exchange-Traded Funds): Similar to mutual funds but traded on stock exchanges like individual stocks.
    • Bonds: Loans to governments or corporations that pay periodic interest and return the principal at maturity.
    • Real Estate: Investing in property, either for rental income or long-term appreciation.
    • Commodities: Investing in raw materials or primary agricultural products such as gold, oil, natural gas, or wheat.

    Benefits of investing:

    • Compound Growth: Over time, your investments can grow exponentially due to compounding returns.
    • Diversification: Reducing risk by spreading investments across various asset classes and sectors.
    • Passive Income: Earning income without active involvement, such as dividends from stocks or rental income from real estate.

    What is Trading?

    Trading involves buying and selling assets frequently, often within short time frames ranging from minutes to months. Traders seek to profit from market fluctuations, capitalizing on short-term price movements.

    Types of trading:

    • Day Trading: Buying and selling assets within the same day.
    • Swing Trading: Holding assets for several days to weeks to profit from short-term price movements.
    • Scalping: Making numerous trades throughout the day to profit from small price changes.
    • Position Trading: Holding positions for months, based on longer-term trends.

    Benefits of trading:

    • Quick Profits: Potential to make money quickly by exploiting short-term market movements.
    • Flexibility: Ability to react to market changes and adjust strategies accordingly.
    • High Liquidity: Easy to enter and exit positions due to the short-term nature of trades.

    What about risk?

    Investing tends to be less risky due to diversification and holding assets long-term. Trading can be riskier due to the fast-paced nature and reliance on market timing.

    Real-life examples of investment and trading

    InvestingTrading
    Regular contribution of a portion of the income to the retirement plan. Over the years, as the market grows, so does the investment. By the time you retire, the investments have significantly appreciated as well.Buying and selling stocks within the same trading day using technical analysis indicators to make quick decisions.
    Investing in real estate by purchasing a rental property and renting it out. The rental income covers the mortgage payments and provides a steady cash flowFollow economic news and market trends to buy and sell commodities. When the price of an asset seems to rise due to geopolitical tensions, buy a specific asset. Weeks later, after the price increased as expected, sell the asset at a higher price, earning a profit from the trade.

    Summing it up, investing is more suitable for individuals looking to build wealth over time, save for retirement, or fund long-term goals like buying a home or paying for education. While trading is best for those lucky people who have time to monitor the markets closely, have a higher risk tolerance, and seek to capitalize on short-term opportunities.

    For further reading, you might find the well-regarded portal insightful for a more comprehensive definition of these two strategies: https://www.investopedia.com/ask/answers/12/difference-investing-trading.asp

  • Getting Started with Dollar Cost Averaging (DCA) in Cryptocurrency

    Getting Started with Dollar Cost Averaging (DCA) in Cryptocurrency

    I used to think/believe that crypto was just a big scam – a way to buy fake money with real money was not appealing to me. But with all the recent news about Bitcoin ETFs, rumors about the U.S. government considering the creation of a strategic Bitcoin reserve, Regulatory Acceptance etc etc, I’ve changed my tune.

    Funny thing is how I thought $100 for a Bitcoin was not acceptable, not even $1.000 or $60.000, but reading more about it and analysts’ predictions for the next years, $108.000 (today’s highest) seems cheap now 🙂

    With my tail between the legs, I’m dipping my toes into the crypto waters, setting up some DCA bots to slowly give away my real money for something I will never see or touch. It’s exciting and impressive to see how the landscape is evolving, and I’m eager to see where this journey takes me! Better late than never, I guess.

    Since I used DCA with stocks and index funds successfully for few years now, I decided to use it with crypto, especially since I have never swum in this lake before.

    So what is DCA?

    In simple terms, Dollar Cost Averaging (DCA) is an investment strategy where an investor divides the total amount to be invested across periodic purchases of a target asset regardless of the market price. This method/strategy aims to reduce the impact of volatility on the overall purchase by spreading out the investment over time, rather than investing a lump sum all at once.

    Why using DCA?

    DCA is often compared to market timing strategies. While market timing can yield higher returns if done correctly, it requires significant skill and market knowledge. DCA, on the other hand, is simpler, reduces the risk of poor timing and emotional decision-making.

    Again, in simple terms, DCA is used to mitigate the risks associated with market timing and volatility. By investing regularly over a period, investors can average out the cost of their investments, potentially buying more shares or units when prices are low and fewer when prices are high. This strategy is particularly useful for long-term investments and for individuals who may not have the time or expertise to actively manage their investments.

    Pros and Cons of Dollar Cost Averaging

    Pros:

    • Reduces Timing Risk: By spreading investments over time, DCA reduces the risk of investing a large amount of money just before a market downturn.
    • Disciplined Saving: DCA encourages a disciplined approach to investing, making it easier to stick to a financial plan.
    • Lower Emotional Stress: Regular, smaller investments can help reduce the emotional stress and anxiety associated with trying to time the market.
    • Potential Lower Average Cost: Over time, the average cost per share or unit may be lower than if a lump sum were invested at a single point in time.

    Cons:

    • Missed Opportunities: If the market rises steadily over time, a lump sum investment at the beginning could potentially yield higher returns compared to DCA.
    • Higher Transaction Costs: Regular investments may result in higher transaction costs, especially if the brokerage charges fees per trade.

    Guess there is too much text, let’s see some examples.

    An investor decides to invest $12,000 in Bitcoin using DCA. He/she plans to invest $1,000 at the beginning of each month for a year.

    • Month 1: Bitcoin price is $90,000. The investor buys 0.0111 BTC.
    • Month 2: Bitcoin price drops to $80,000. The investor buys 0.0125 BTC.
    • Month 3: Bitcoin price rises to $100,000. The investor buys 0.01 BTC.
    • …

    By investing monthly, the investor buys Bitcoin at different prices, which could help manage the volatility inherent in the cryptocurrency market.

    Conclusion

    Dollar Cost Averaging is an investment strategy that can help manage market volatility and reduce the risk of poor timing decisions. While it has its advantages, such as promoting disciplined saving and reducing emotional stress, it also has some drawbacks, including potentially higher transaction costs and missed opportunities. However, for long-term investors, DCA can be a valuable tool to build wealth over time, whether investing in stocks, crypto, or other assets.

    Referral links

    If you’re interested in diving into cryptocurrency investments, consider using my referral links from platforms like Binance and Bybit and we will both benefit from it. Both platforms offer attractive referral programs for new users, although Binance is a more straightforward than Bibit, in my opinion.

    Both platforms have very easy ways to setup recurring crypto investments. I’m adding the links below to save you time looking for it 🙂 Either way, if you’d like a post specifically about setting this up on either platform, let me know in the comments.

    Binance: What Is Auto-Invest and How to Use It

    Bybit: Learn How to DCA Into Crypto With Bybit’s DCA Trading Bots

    Happy investing!

  • Carros de foc. Day 6. Refugio Ventosa i Calvell – Planell d’Aigüestortes Hiking

    Carros de foc. Day 6. Refugio Ventosa i Calvell – Planell d’Aigüestortes Hiking

  • Carros de foc. Day 5. Refugio Restanca – Refugio Ventosa i Calvell Hiking

    Carros de foc. Day 5. Refugio Restanca – Refugio Ventosa i Calvell Hiking

  • Carros de foc. Day 4. Refugio Saboredo – Refugio Restanca Hiking

    Carros de foc. Day 4. Refugio Saboredo – Refugio Restanca Hiking

  • Carros de foc. Day 3. Refugio Mallafré – Refugio Saboredo Hiking

    Carros de foc. Day 3. Refugio Mallafré – Refugio Saboredo Hiking

  • Carros de foc. Day 2. Refugio Colomina – Refugio Mallafré Hiking

    Carros de foc. Day 2. Refugio Colomina – Refugio Mallafré Hiking

  • Carros de foc. Day 1. Planell d’Aigüestortes – Refugio Colomina Hiking

    Carros de foc. Day 1. Planell d’Aigüestortes – Refugio Colomina Hiking

  • Stage 7. Torres del Río – Logroño

    Stage 7. Torres del Río – Logroño

    Ahhh, last day, 20 km only. And the total ascent was very soft, nothing hard.

    The morning/breakfast is already slightly described in the previous post, nothing else to mention.

    In general this day went by very fast. Only by mid-distance we reached the first city – Viana. The rest of the route passes through camps and forests.

    Overall a nice and easy day. We reached Logróño in 4 hours and a half and stopped at a nice hotel to thank our bodies for the effort done during the last days. A good shower, with hot water, is everything I needed! Afterwards we went to Calle Laurel, a famous street/area with bars and restaurants offering various types of pinchos. since there weren’t many vegan options, we repeated more than ones in the same place. The best was a place that offer mushrooms grilled in garlic sauce – Bar Cid . It was mazing!

    Bar Cid

    Today, we had a quick and small breakfast in the first open cafeteria, since it Sunday and Easter, there were not a lot of options either.

    However, for lunch we went to a known place called Sol Veggie. This was wow!! You can really see the difference between a place with vegan options and a vegan place. We ordered too much and had to cancel one dish because it was too much for our stomach 😂 Everything was super tasty! We also ordered vegan shawarma for the train back home, that I can’t wait to eat after posting this post 😛

    After lunch Lucía went to have a quick siesta and I went to buy some baclava from a place I dreamed about all week 😅🤤 this is a Syrian place called Pastelería Damasco. They have the best baclava I have ever eaten! If you go there, cautious, this desert is very addictive! I warned you!