ETF Trading

ETF trading takes place on an exchange. In the US, exchange traded funds are listed on AMEX and the NYSE. Investors can buy and sell ETF's in the same manner that they purchase shares. This permits using ETF's to trade, sell short or hedge. ETF trading can be integrated with complex strategies, purchased on margin and traded using stop and limit orders. ETF's are traded on a continuous basis throughout the day and not restricted to once-off transactions. Price quotations can be obtained on a real time basis allowing traders to make up to the minute decisions.

Exchange traded funds trading offer numerous benefits and advantages. One of these advantages is diversification. ETF's offer exposure to a wide variety of markets including: small cap, value, large cap, broadly based international and country specific indexes such as Brazil, China and India and sector specific indexes such as energy, healthcare and real estate. Investors can also gain exposure to a basket of commodities, treasury bonds, corporate bonds, and commodities such as gold, silver and oil.

Investors can also invest in ETF's to gain exposure to a basket of high paying dividend stocks. Dividends collected by ETF's on stocks and interest on bonds are distributed to ETF holders on a pro rata basis. ETF traders that want to capitalize on potential growth and capture income can examine ETF's as part of an ETF strategy or ETF trading system.

Exchange traded funds can be used as part of a hedging strategy. For investors that are long core holdings and want to hedge from short term market corrections or insulate against interest rate fluctuations, ETF's provide a vehicle to protect a portfolio from losses. Some ETF's also have listed options which are an additional avenue available for hedging or generating income.

Unlike mutual funds, ETF trading does not encounter redemption fees, short term restrictions or upfront access fees. For any serious investor or trader, ETF's are well worth considering to add an additional dimension to their trading and investing.