Build conviction before you make your next move

There are two types of investors: those who prefer to sit back and ride the market, and a growing number who want to take control and aim for outsized gains. With the rise of ETFs designed to amplify directional moves, active investors now have more tools to express their market views and capitalize on short-term trends in commodities and indexes. But success hinges on having a strong thesis – because without it, even the most powerful strategies can fall flat.

The savviest and most successful investors don’t rely on gut instinct. They take an analytical approach to selecting their investments and build confidence in their decisions by considering the trends and drivers that could push a sector higher or drag it down. That’s especially important if you use leverage or inverse-leveraged ETFs that amplify returns and losses. These products are designed for experienced traders and may not be suitable for all portfolios.

Of course, that can be easier said than done for shorter-term traders. Taking a broad macroeconomic view of, say, the impact tariffs have on U.S. markets is a good way to approach long-term investing. But given that bull and bear ETFs are supposed to be held for only a day or two, it doesn’t really matter where the S&P 500 might go three months from now. It can offer insights into how markets have reacted to similar events.

Instead, focus on patterns in how stocks or commodities have moved in the past. Yes, what happened yesterday does not mean it will happen again tomorrow, but historical performance can be a good way to see how markets react to specific events.

Here’s a good example: Over the past several decades, the Canadian market has consistently moved higher on the days U.S. markets are closed. According to research from Global X Research Analyst Brooke Thackray, on most U.S. Thanksgivings, when Americans are binge-watching football and feasting on turkey, the S&P/TSX Composite has been rising – since 1977, the index has climbed 83% of the time by an average of 0.3%. While that’s not a significant gain on its own, if you hold the BetaPro 3x S&P/TSX 60 Daily Leveraged Bull Alternative ETF (TCND), you could transform that small move into a nearly 1% return – not bad for a single day’s trade.

Another pattern might be how oil and natural gas respond to the U.S. Energy Information Administration’s inventory report, released at 10:30 am every Wednesday. As we explore in another story, you can see distinct movements in these commodities after the report is released. Price movements are less predictable here than at the holidays, but if you examine past patterns and think about what the release could show based on your own inventory-related research, you could build conviction around where markets might go.

Many short-term traders also use technical analysis, trend watching and a lot of research to build conviction in an idea. For instance, a 3x or -3x Nasdaq or S&P 500 ETF could be useful during earnings season, when market-moving companies like NVIDA or Apple are reporting.

An unexpected earnings miss or a surprise beat by some of the largest publicly traded companies can significantly impact the wider market. Research from Nasdaq shows that when an S&P 500 company misses earnings, its stock price falls by an average of 2.5 percentage points during the trading session following the announcement. By contrast, a beat only increases a company’s stock by 0.75 percentage points. In finance, the term “beat rate” refers to the percentage of companies reporting earnings above analyst expectations during earnings season, signaling how broadly corporate performance is outpacing forecasts.

Nasdaq’s researchers speculate that this may be because the five-year average beat rate for the S&P 500 is 77%, making overperformance appear less surprising than underperformance. Some market participants adopt contrarian perspectives, anticipating that there may be some potential big misses on the horizon. If that’s your perspective,  you could consider the BetaPro -3x Nasdaq-100 Daily Leveraged Bear Alternative ETF (SQQQ) to take advantage.

Many traders also use technical analysis to determine where a stock or index may be headed. This involves looking at price movements, trading volume and chart patterns instead of fundamentals, like earnings. Because most people think all information is already reflected in a stock’s price, technical patterns can help predict short-term movements.

For instance, a popular technical strategy is to look at the resistance level of an investment. Say a stock normally trades in the $60 range and hasn’t broken through that ceiling in a meaningful way. Then, at some point, it hits $61, coinciding with a surge in trading volume meaning more shares are trading than usual. That’s a sign the stock may break through its price.

If, during past breakouts the stock climbed by a few percentage points before settling into a new range, you could use that pattern as one of several factors to help determine a price target at which you want to sell. You might also use a stop-loss order – an instruction you give to your broker to sell a security once it falls to a specific price – at $60.25 to protect some gains or ensure you don’t lose too much if the market retreats.

The key to this is to build a repeatable strategy you’re comfortable following. For new investors, that will take time, but think carefully about what kind of technical analysis you want to deploy or what event-driven trends or seasonal patterns, such as the holiday trade, you want to circle on your calendar.

It’s also important to plan an exit strategy. There may be those times when you buy something that doesn’t pan out the way you expected, so you may want to get out of that trade quickly. Even if your investment thesis is spot on, it’s important to stay disciplined and plan to sell – especially when using leveraged ETFs. If you stay in the market for too long, those positive returns could quickly move in the opposite direction. As we said earlier, you can always try to protect yourself using stop-loss orders to quickly get out of an ETF.

Building conviction also takes time. If you have an idea or want to see how a strategy performs during different cycles or events, you could invest a small amount of money to see if it pans out. Keep testing and refining your strategy, and you’ll feel comfortable with bull and bear ETFs in no time.

DISCLAIMERS

Commissions, management fees and expenses all may be associated with an investment in products (the “Global X Funds”) managed by Global X Investments Canada Inc. The Global X Funds are not guaranteed, their value changes frequently and past performance may not be repeated. Certain Global Funds may have exposure to leveraged and inverse leveraged investment techniques that magnify gains and losses which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the prospectus. The prospectus contains important detailed information about the ETF. Please read the relevant prospectus before investing.

The Global X Funds include our BetaPro products (the “BetaPro Products”). The BetaPro Products are alternative mutual funds within the meaning of National Instrument 81-102 Investment Funds and are permitted to use strategies generally prohibited by conventional mutual funds: the ability to invest more than 10% of their net asset value in securities of a single issuer, to employ leverage, and engage in short selling to a greater extent than is permitted in conventional mutual funds. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in shares of a BetaPro Product decreases in value.

The BetaPro Products consist of our Daily Bull and Daily Bear ETFs (the “Leveraged and Inverse Leveraged ETFs”), Inverse ETFs (the “Inverse ETFs”), and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”) and can offer opportunities for enhanced returns or hedging strategies, but it’s essential to understand and accept the associated risks. Leveraged ETFs aim to amplify the returns of an underlying index, which can lead to higher gains, but they also magnify losses in downturns. Similarly, inverse ETFs seek to profit from declines in the underlying index, meaning they can perform inversely to the market, but losses can accumulate quickly if the market moves against expectations. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in shares of a BetaPro Product decreases in value. Investors should be aware of and understand their risk tolerance and capacity, and conduct their research before investing. An investment in any of the BetaPro Products is not intended as a complete investment program and is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment.

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Published September 26, 2025