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What are ETFs?
ETFs, or Exchange Traded Funds, are very different from FX trading. The ETF are a type of investment fund that tracks underlying assets like indices, bonds, commodities and divides ownership of those assets into shares. ETFs are traded on an exchange, and their value shifts during the day, due to buying and selling actions done by the traders. As ETFs trade just the same way stocks do, they do not have their own net asset value (NAV), and they are calculated once at the close of every market day.
Why Trade ETFs with AvaTrade?
With over 11 years of direct industry experience, establishments in 150 countries and an outstanding multi-lingual customer support team, AvaTrade is the broker of choice for many trading opportunities:
- Trade with confidence – AvaTrade is an internationally regulated broker.
- Large variety of instruments – Choose from a variety of instruments to trade with CFDs.
- Competitive Spreads – The best in the market.
- Leverage – Get leverage of up to on your trades.
- Short trading available – Benefit also when the market goes down.
- Master your online trading skills – High quality trading educational materials & daily market analysis.
- Best in class costumer service – Multi-lingual live support.
What is ETF Trading?
An ETF is a collection of assets put together, to permit traders to trade in a few markets simultaneously. The baskets are usually combined together with a common characteristic such as energy instruments, agriculture instruments and others. If you wish to trade a stock, commodity and bonds all together you can simply trade in the ETF market.
Some ETFs track the performance of a specific nation’s equity market. Examples are the MSCI Brazil Index Fund, MSCI South Korea Index Fund and others. ETFs also make it possible to invest in certain industry sectors. Examples offered by AvaTrade are the Dow-Jones U.S. Real Estate Index Fund and the Energy Select Sector SPDR. It is important to know that all ETFs are traded as CFDs.
ETFs are traded as a basket of assets – stocks, commodities and more, put together per sector. If you speculate that the energy market, for instance, will go up, you can invest in a few trades simultaneously. A prominent advantage of ETFs is that often they balance each other out; if one instrument’s value goes down, another instrument’s value can go up and even it out. If the price of crude oil goes down, as part of the energy basket, a stock of the same basket might even it out.
How to Trade ETFs with AvaTrade?
Since ETFs play on the range of markets, you’ll need a broker that offers trading in all those markets with good conditions. ETFs require knowing the markets well enough to determine when to enter it and when to exit, and to know how each instrument will affect the other. AvaTrade is aware of the ETFs’ special nature and helps you stay on top of the market, to use the price changes to your favour.
AvaTrade offers a range of popular ETFs to trade as CFDs, giving traders the ability to trade long or short with leverage of up to .
- GDX – VanEck Vectors Gold Miners ETF
- Energy Select Sector SPDR
- EWZ – MSCI Brazil Index Fund ETF
- EEM – MSCI Emerging Markets Index Fund
- Dow Jones US Home Construction Index Fund
- Materials Select Sector SPDR
- Financial Select Sector SPDR
- S&P 500 VIX Short-Term Futures ETN
- Dow Jones U.S. Real Estate Index Fund
- S&P 500 SPDR
When you wish to start trading, you can choose from a vast selection of trading platforms. Two of them are built for manual trading, whilst others are for traders who prefer their trades to be done automatically. Thanks to that variety each of our clients can find the platform that is most convenient for him to trade on. Opening a forex demo account before trading is a recommended option, so you can practice trading on those platforms before doing so in the real market. Platforms available at AvaTrade – and fully compatible with Android or iPhone:
One of the most common tools used by traders is Leverage, whose purpose is to enable the trader to open positions larger than his account’s equity. AvaTrade offers you up to leverage when trading ETFs, which is the equivalent of 5% of a position’s value required in order to open it. Leverage is a common tool used worldwide, and we offer the best conditions for it
We will give an example; if you want to trade a certain ETF basket that is valued at $2,500, a rather large amount of money. Using leverage, however, will require using only 5% of the position, which means you’ll only have to use $125 of your account.
Using Leverage makes trading easier and can increase a trader’s profits. However, one should always bear in mind that losses can be magnified on the same scale.
How Much Will it Cost to Trade ETFs?
You can read more about the benefits for our clients on the Trading Conditions & Charges page.
Educational tools available at AvaTrade
When trading any instrument, especially one as complex as ETFs, you need to keep yourself updated and informed at all time. Naturally AvaTrade caters clients with education and product knowledge, and we recommend using our video tutorials and other educational tools. Let us guide you all the way, and get exposed to learning materials and market reviews that are essential for trading.
Our portfolio of educational tools is vast. In addition, an education portal developed and maintained by AvaTrade offers any level of trader the right tools to get started on a potential trading career.
Start Trading ETFs with AvaTrade
If you enjoy working on several markets simultaneously, challenging yourself into making rational investments and trading on one of the most prestigious markets in the world – trading Exchange Traded Funds is exactly for you!
Main ETF FAQ
How does ETF trading work?
Trading ETFs has become popular because it combines the ease of stock trading with the diversification found in mutual funds. They can be bought and sold in the same way as any stock, but because they mirror the composition of some index or other sector they are a useful way to capitalize on larger macro trends in the market. ETFs make it possible to speculate on the broader markets, such as the US 500. They can also be used in commodity trading, where using futures can be costly and require large upfront capital.
Are ETFs good for beginners?
Trading ETFs is a perfect way for a beginner to become familiar with the markets and to begin their trading career. This is because ETFs feature low costs, excellent liquidity, diversification, a broad choice of investments, and a low initial capital requirement. Beginners can use some of the most popular trading strategies to get started, and can focus on any industry, asset type, or market sector they like. There are even inverse ETFs that can be used to mimic shorting a stock, but with fewer risks.
Can you make money trading ETFs?
Because ETFs are bought and sold similarly to stocks or other asset classes they can be used to make profits. However they do not guarantee profits. A loss can be incurred from an ETF trade just as it can from any other type of trading. So it is important to understand the ETF you’re buying before investing. Some ETFs use short selling or leverage to try and generate better returns. This also increases the risks involved in trading these ETFs.