Can stocks, futures or options be used in place of mutual funds and ETFs?
Market correlation of the trading or investment vehicle is an important factor in the success of The System. Since the timing functions are based on the stock market, large deviations away from it would render the timing portion irrelevant. Stocks are affected by the market to some degree, but are primarily driven by other factors including company specific and industry specific events and perceptions. Futures and options are highly leveraged and have a time component that makes them less than ideal as trading vehicles in a trading system that is intermediate term oriented. Leveraged ETFs might be a better choice. Mutual funds, including ETFs, are the preferred investment vehicle. They allow the trader or investor instant diversification, an important factor in the risk avoidance part of the trading model. Mutual funds are easily bought and sold with minimal to no transaction fees, as long as sales loads are avoided. Think of them as “baskets of stocks” that can be analyzed, charted an
