The First Trust Dorsey Wright DALI Equity ETF (DALI) seeks to track the Dorsey Wright DALI Index, which measures the performance of U.S. equity securities selected using Dorsey Wright's relative strength methodology. This tactical equity ETF focuses on stocks showing strong momentum characteristics across multiple time frames.
How It Works
DALI employs an active momentum-based strategy that selects approximately 50-100 U.S. stocks demonstrating superior relative strength compared to the broader market. The fund uses Dorsey Wright's proprietary point-and-figure charting analysis to identify securities with positive price momentum across various sectors. Holdings are rebalanced monthly based on updated relative strength rankings, with equal weighting applied to selected positions to avoid concentration in any single stock.
Key Features
- Uses proprietary Dorsey Wright relative strength methodology combining technical analysis with quantitative momentum screening for stock selection
- Monthly rebalancing ensures portfolio stays aligned with current market momentum trends and removes weakening positions
- Equal-weighted approach prevents over-concentration while maintaining focused exposure to approximately 50-100 high-momentum U.S. stocks
Risks
- This ETF can lose value significantly during momentum reversals when previously strong stocks suddenly underperform, potentially declining 20-30% rapidly
- Monthly turnover from momentum-chasing strategy generates higher transaction costs and potential tax inefficiency compared to passive buy-and-hold approaches
- Concentrated portfolio of 50-100 stocks creates higher volatility than broad market ETFs, especially during sector rotation periods
Who Should Own This
Best suited for tactical investors with 6-18 month time horizons seeking momentum exposure as a satellite holding (5-15% of equity allocation). High risk tolerance required due to momentum strategy volatility and potential for sharp reversals. Appropriate for active traders comfortable with technical analysis-based approaches.