Exchange-Traded Fund (ETF)
ETF Trading Defined and Explained
ETFs are groups of securities that are traded just like individual stocks. ETF trades are often more tax efficient than normal mutual funds. ETFs are like un-managed funds that allow investors to trade a portfolio of securities in a single transaction. They also offer investors international exposure to securities. ETFs are somewhat more flexible than mutual funds in that they can be traded on an exchange throughout the day. Also, like stocks, the price of an ETF trade is determined by forces of supply and demand for the ETF shares.
All the major stock indexes have ETFs based on them, so there are ETFs for nearly every trading interest. There are ETFs for large US companies, small ones, real estate investment trusts, international stocks, bonds, and even gold. All a trader has to do is pick an asset sector that is publicly available and there is a good chance that it is represented by an ETF or will be soon.
For most popular broad indexes, choosing between an ETF and an index fund depends on how much one has to invest at a time. A shorter time frame may point to trading in ETFs. Another factor is how many funds are involved in one ETF, as well as the commissions charged by the broker. ETF investors can exploit their positions to protect holdings in a conservative manner.
ETF Trading Strategy
Exchange-traded funds have many strengths, but transaction fees can’t be avoided with ETFs. ETFs must be bought and sold like a stock through a brokerage house, thus the fees. For substantial purchases, this transaction fee is an insignificant percentage, but for small purchases it cuts into the short term profits from ETF trading. ETF Investors are often best served to invest at least $1,000 per ETF trade.
ETF Trading Software
Ask any ETF trader, producer or general investor what trading tools or types of financial analysis he is using to track ETF trends and you’re probably going to hear a list of different technologies and methods. However, having the right tool for the job is important. Trading software can be used to boost an existing approach by supplying an inter-market perspective. The key to an ETF trading system is its ability to forecast moving averages.One of the better ETF trading software products is VantagePoint trading software. This software can help “see” what is likely to happen in the ETF market before other traders (using only single-market analysis) catch wind of it.
ETFs are index funds at heart, so traders of ETFs are encouraged to study the philosophy of index fund trading and ETFs. But unlike most traditional index funds, investors do not have to take a passive, buy-and-hold approach. ETFs are also becoming favorites of hedge funds and day traders who like to get in and out of the market frequently.
Popular ETFs and ETF Indexs
- Dow Diamonds (DIA)
- Energy SPDR
- Financial Sector SPDR
- Semiconductor HOLDR ETF
- MidCap SPDR Trust ETFs
- iShares MSCI EAFE Index
- iShares MSCI Japan Index
- QQQQ (NASDAQ 100)
- iShares DJ Real Estate
- iShares Russell 2000
- Spyders (S&P 500)
- StreetTracks Gold Trust
- iShares TR LEH 20+ T-Bond
Trading ETFs with VantagePoint Software
Since 1991 VantagePoint Software has been applying Artificial Intelligence to forecast market trends with up to 86% accuracy. With more than 25,000 customers in 114 different countries, VantagePoint is the leading AI trading software for Futures.