As the popularity and number of ETFs continues to grow, so do the number of traders trading them, but Stoyan Bojinov of ETFdb.com points out that there might be some details you are overlooking, which could impact your profits.
The growth of the ETF industry has led to major strides forward in democratizing the investment process, and ongoing evolution in the exchange-traded universe continues to bring forth previously hard-to-reach asset classes at the fingertips of mainstream investors. With innovation also comes complexity however, and ETFs are no different from other financial instruments in the sense that they are far from foolproof despite their numerous efficiencies.
The ever-changing financial landscape demands that investors and traders alike stay on top of noteworthy developments in the industry as well as keeping up with ETF education, which is certainly an ongoing process. As such, below we outline three important ETF trading tips, which are all too often overlooked:
Is The Market Open?
This is a serious question that far too many investors forget to ask themselves before buying into a position. When trading ETFs that offer exposure to foreign equities, commodities, and currencies, it’s important to ask yourself whether the underlying market you wish to access is actually open for trading. Why? Because it costs more to trade when the ETF and the securities it is supposed to track aren’t trading at the same time. Timing your ETF trades while the market for the underlying securities is open may help to reduce pricing discrepancies; simply put, it pays off to trade when the market you wish to access is actually open.
Keep in mind that, European stocks traded on the Euronext are open for trading until 10:30 am (EST), while the London Stock Exchange is open until 11:20 am (EST), and stocks traded in Australia, China, and Japan do not overlap with Wall Street trading hours. For commodity traders, metals futures on the Comex Metals Exchange are traded from 8:20 am - 1:30 pm (EST) and grain futures at the Chicago Board of Trade are traded from 10:30 am - 2:15 pm (EST).
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