ETF trading

ETF trading AU

ETF trading refers to Exchange Traded Funds. This is a unique type of investment fund which tracks the underlying financial instruments of the fund. ETFs include commodities, bonds, or indices. Ownership of ETF investment funds is divided up into shares.

ETF trading is conducted on an exchange, and the value of ETFs will change on a daily basis, as determined by price movements in the underlying financial instruments. ETF traders buy and sell ETFs – much like stocks – but there is one notable difference.  ETF trades have a net asset value (NAV) which is determined at the close of the market, every single day.

ETF’s table of Contents

➤ Open an ETF trading account with AvaTrade and enjoy the benefits of an internationally regulated broker!

ETF Trading with AvaTrade – Top Reasons to Make that Trade

ETF Australia trading requires experience, regulatory compliance, and professionalism across the board. AvaTrade Australia is heavily experienced in the industry, as an expert ETF trading brokerage.

The company is established across 150 countries with superb multi-lingual customer support and service teams. As the broker of choice for ETF trading around the world, AvaTrade Australia also offers the following benefits:

  • Short-Sell Options – Generate profitable returns when markets turn bearish.
  • Trade with Complete Confidence – AvaTrade is internationally regulated as a Forex and CFD brokerage.
  • Competitive Spreads – Enjoy low spreads on financial instruments across the board.
  • World-Class Customer Support – AvaTrade Australia features multilingual live customer support and service.
  • Leveraged Trades – Enjoy leverage of up to 20:1 on your trades at AvaTrade Australia.
  • Master ETF Trading – AvaTrade Australia offers high-quality educational trading tools, materials, and resources to make informed trading decisions.
  • Plenty of Assets to Trade – Enjoy stocks, Forex, commodities, indices, and ETF trading with CFDs.

You are welcome to open an ETF trading account at AvaTrade Australia and enjoy the many benefits of our internationally regulated broker.

What is an ETF?

What is an ETF? The word ‘ETF’ is an acronym for Exchange Traded Fund. In its simplest form, an ETF is a collection of assets.

These financial instruments are grouped together, allowing Australian traders to dabble in multiple markets at the same time. Think of it as a basket of hand-picked financial instruments that trade as one entity.

While this presents an adequate answer to the question, what is an ETF, it’s not sufficient. An ETF is a group of assets that have a common underlying characteristic.

These may include agriculture instruments, energy instruments, gold instruments, or financial instruments et cetera. If you wish to trade multiple financial instruments simultaneously, you are best served with ETF trading.

Here in the land down under you can enjoy ETF Australia trading at AvaTrade, with complete confidence. Certain ETFs track the financial performance of a specific country’s equity market such as the MSCI South Korea Index Fund, or the MSCI Brazil Index Fund.

It’s entirely possible to enjoy ETF trading with respect to certain industry sectors. At AvaTrade UK, you can participate in ETF trading with Energy Select Sector SPDR, or the Dow Jones US Real Estate Index Fund.

Unlike traditional platforms where ETF trading is permitted, AvaTrade Australia offers ETFs as CFDs. These contracts for difference are derivatives trading instruments that track the underlying price movements of the ETF in question. ETF traders are not purchasing actual ETFs, rather you are trading a contract that is bullish or bearish, based on your due diligence and estimations.

What is an ETF?  An ETF is traded as a basket of financial instruments. These encompass stocks, commodities, indices, bonds, et al according to the sector. Assuming you are trading ETFs in the energy sector, you may speculate that prices will rise – a bullish proposition – and invest in multiple energy-related assets simultaneously.

By spreading your capital across multiple financial instruments within the same sector, you are mitigating the potential for loss. Certain assets in the ETF may rise in price, while others fall, thereby balancing out the negatives, and providing a cushion for the trade.

Assuming you have invested in an energy ETF, which includes oil stocks, drilling companies stocks, physical stores of crude oil, et cetera, you may benefit from the prices of different components of the energy ETF balancing one another out.

Commodity ETF trading is increasingly popular nowadays. Institutional investors and retail investors are flocking to this market, owing to the ease of trading commodity ETFs. These markets are generally liquid and popular among traders.

ETF Trading for Futures Markets

Be advised that many institutions are loath to offer trading in futures markets. If you happen to take advantage of market trends, it is quite possible to generate a profit by way of ETF trading.

An example will make it much easier to answer the question, what is an ETF and how can you trade ETFs. Consider oil prices for a moment. If the prices are rising, an energy ETF may be the perfect investment vehicle for you.

You can buy natural gas and crude oil (WTI or Brent Crude), as well as the infrastructure necessary for mining crude oil by way of ETFs. You could purchase individual assets, but that is time-consuming and costly. A better option is a single energy sector ETF.

A classic example of an energy sector ETF is XLE – Energy Select Sector SPDR ETF – which is readily available to registered traders right here at AvaTrade. ETF Australia trades are conveniently available for your portfolio of investments. Few financial instruments have impacted markets quite as much as ETF trading.

Be advised that specific ETFs are negatively correlated, or inverse ETFs. When you trade inverse ETFs, the pricing moves in the opposite direction to the price of the underlying asset. One classic example of a negatively correlated ETF is SPDN.

This Exchange Traded Fund is the Daily S&P 500 Bear 1X Shares ETF. Many traders view this as a hedge against the S&P 500 since this index will rise when there is a downturn in the S&P 500. Another powerful tool at AvaTrade Australia is leverage; it boosts the ETF trading power of your capital.

What’s the Difference Between ETF Trading and Mutual Fund Trading?

ETF trading and mutual fund trading have striking similarities. They are both professionally managed baskets of individual stocks, commodities, indices, and/or bonds. The difference between ETF trading and mutual fund trading rests in how to trade ETFs versus how to trade mutual funds. You can trade an ETF directly on an exchange, and exit trades quickly. Many of the ranking financial markets around the world facilitate ETF trading.

Mutual funds by contrast have to be traded through a broker, not through an exchange. There are also other requirements with brokers that may serve as a disincentive to traditional traders, notably the higher minimum initial purchase that is associated with mutual funds. The actual holdings in a mutual fund are also vaguer.

The reason for this is that mutual funds are actively managed funds while ETFs simply track price movements of financial instruments. You are relying heavily on the money manager to have the requisite experience needed to trade mutual funds. You have limited say in these types of investments.

What are the Differences between ETF Trading and Index Fund Trading?

Exchange-Traded Funds a.k.a. ETFs confer many benefits over Index Fund Trading, notably the costs of purchasing shares in ETFs, as well as the tax differences between these two financial instruments. For all intents and purposes, traders prefer ETFs, particularly ETF Australia-friendly options.

It is worth pointing out that index funds may well be a worthwhile proposition if you’re looking to invest in one position over the long haul. Index funds have been around for eons, and they confer ownership of stocks that make up the whole index fund. Examples of index funds include the Dow Jones US Real Estate Index Fund, and the Dow Jones US Home Construction Index Fund.

Start ETF Trading with AvaTrade Australia

Given that ETFs cover a broad spectrum of the market, it’s necessary to pick a broker that provides CFD trading across all those markets, with favorable trading conditions. A seasoned ETF trader understands precisely when to enter and exit markets, understand price movements with financial instruments, and the interrelatedness of all these components.

Fortunately, ETF Australia’s options meet all these requirements at AvaTrade. That’s why it’s possible to enjoy profitable ETF trading by using price movements to your advantage. With ETF trading, you are tasked with monitoring macroeconomic variables, and determining how price movements will affect your ETF.

AvaTrade ETF Australia options include a wide range of popular ETFs which are traded as CFDs (contracts for difference). With these, you can Buy ETF CFDs (Go Long), or Sell ETF CFDs (Go Short), using the leverage of up to 20:1.

  • S&P 500 SPDR
  • Energy Select Sector SPDR
  • Materials Select Sector SPDR
  • Financial Select Sector SPDR
  • Dow Jones US Real Estate Index Fund
  • S&P 500 VIX Short-Term Futures ETN
  • GDX – VanEck Vectors Gold Miners ETF
  • EEM – MSCI Emerging Markets Index Fund
  • Dow Jones US Home Construction Index Fund

You’re welcome to open an ETF CFD trading account at AvaTrade Australia, with all the attendant benefits of a globally regulated, award-winning broker.

Best ETF Trading Platforms

Once you are ready to start trading ETFs, you are welcome to pick from a variety of world-class trading platforms. Some of these ETF trading platforms are designed for manual trading, while others are expressly designed for traders who prefer automated trading. AvaTrade Australia also facilitates the use of expert advisors for MetaTrader 4 (MT4).

It is precise because of this variety of ETF trading platforms that clients can source the right platform for their needs. It is highly recommended that you try ETF trading on a demo account before you trade for real money. Practice trading ETFs under real-world conditions, with demo accounts. AvaTrade trading platforms are fully compatible with Android and iOS devices.

  • Trade ETFs using MetaTrader 5 (MT5).
  • Trade ETFs using Automated Trading Platforms like DupliTrade and ZuluTrade.

Leveraged ETF Trading

Leverage is a powerful tool used by traders to multiply the trading power of their capital. If you have AU$1000 in your account, and you have access to leverage of up to 20:1, you can effectively trade a position valued up to AU$20,000. Leverage is known as Margin Trading.

It is imperative to carefully assess the merits of leveraged trading, given that it can magnify profits and losses. By conducting due diligence with careful technical and fundamental analysis, you can mitigate the negative effects of leverage on your trades.

What are the Costs of ETF Australia Trading?

Feel free to read about the benefits available to Australia-based clients on our trading conditions & charges page.

Educational Tools for Trading ETFs at AvaTrade

The most important resource you will ever need when trading ETFs is information. Access to the right economic data, financial reports, pricing, charts and graphs, and other elements will be of tremendous benefit to you. ETFs can be complicated financial instruments to trade, given that they are a basket of different financial instruments within the same sector.

We encourage ETF traders to make use of our extensive library of trading tools and resources. These include educational guides, video tutorials, articles, trading advice, and other learning materials. All of these are essential for learning how to trade ETFs.

Australia ETF Trading at AvaTrade

Traders who enjoy dabbling in multiple markets at the same time will relish the prospect of ETF trading at AvaTrade. Logical decision-making processes are sacrosanct when trading ETFs online.

ETF trading 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?

    ETF trading combines the best of stock trading and mutual funds trading. You can buy ETFs just like you can buy stocks, with none of the pitfalls of mutual fund trading. ETFs mirror the performance of constituent components in the Exchange Traded Fund.

    ETF trading allows clients to capitalize on the impact of macroeconomic trends on price.

    You can speculate on the S&P 500 index, the Dow Jones US Home Construction Index Fund, and others. Another benefit of ETF trading is that you don’t need all the capital that would otherwise be required for commodities trading in gold, silver, or crude oil.

     
  • Are ETFs advised for beginner traders?

    Contrary to popular opinion, ETFs can be an excellent way to get your feet wet in the trading arena. Since they cover a wide spectrum of the market – commodities, indices, stocks, bonds – there are multiple forces at play. ETFs are also low-cost financial instruments that allow you to enter trades at a fraction of the cost you would pay in commodities markets.

    Other benefits of ETFs include diversification, great liquidity, and a wide range of financial instruments. The low capital requirement is regarded as a top feature of ETFs for beginners. You can use plenty of trading tools, resources, and strategies to trade ETFs across multiple asset categories in the same market sector.

    Another popular form of ETF trading is inverse ETFs, which are inversely correlated with the price of the underlying financial instrument. These are used to short stocks, with limited downside risk.

     
  • Can you make a lot of money trading ETFs?

    Think of ETFs as a stock comprised of multiple different components. It is a basket of financial instruments in the same sector, traded like a stock on the markets. As with any underlying asset, profits cannot be guaranteed in all forms of trading activity. Like stocks, you can also profit from ETF trading, but you can also lose money when trading ETFs.

    Before you begin trading any financial instrument, it’s important to have a sound understanding of the markets, and particularly the nature of ETFs. Margin trading of ETFs can also generate improved returns, but there are downside risks when trades don’t move in your favor. It is also possible to short sell ETFs to achieve a better ROI.