Triple-Leveraged ETFs are the wild-west of the short-term trading landscape.
You can triple your gains if you’re right or triple your losses if you’re wrong.
Here’s a good example of a boom-to-bust quick-cycle in Natural Gas 3x inverse (short) ETN DGAZ:
I’m a huge proponent that 3x inverse ETFs should be used ONLY by day-traders or extremely short-term swing traders.
Nevertheless, these are valid vehicles for quick profit if you’re experienced and aggressive.
For this roughly 30% quick Nat Gas decline in November, the 3x ETN doubled (138%) from $4.00 to $9.50!
However, as Nat Gas price rallied from $2.60 to the current $3.50 level (a 35% gain), DGAZ shares collapsed 60% to trade back under $4.00 today.
Here’s the X-Cross Chart that shows the rally and reversal – boom to bust – for both symbols:
If you were greedy with your gains, you likely watched them evaporate as the 3x fund crashed while Nat Gas surged.
So here we are underneath the prior October low at new chart lows for 2016 for this aggressive ETN.
ALWAYS do your research before trading 3x leveraged ETFs and ETNs. The gains are tempting but the losses can be devastating.
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Corey Rosenbloom, CMT
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