Exchange Trade Funds (ETFs) are tradable. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value. Traders can invest in a specific sector, rather than in an instrument to reduce risk within a single instrument.
Short Trading vs. Long Trading
Considering that the Financial Market fluctuates, it doesn’t matter if you contemplate the price of a specific ETF is going to decrease or increase. When you trade ETFs, you can benefit from every variation in price, up or down. You may select to ‘Buy’ (Long) if you anticipate the ETF in question will gain value or ‘Sell’ (Short) if you consider the ETF will reduce value.
Trading ETFs with Leverage
Leverage is one of the most common tools used by traders, it allows you to boost your buying power. In Trading360 we can teach you how to benefit from the use of leverage and manage risks while trading ETFs.
With a $500 investment, you can open a position valued at $50,000 using a ratio leverage of 100:1.
Leverage permits you to open a position with a larger volume at a rather minor investment. It increases the risk of an investment so it should be used with high level of understanding.