How Do You Trade ETFs?


Quick Answer

To trade exchange trade funds, open an account with a full-service brokerage or a discount brokerage, such as the online brokerages Scotia iTrade, TD Waterhouse, Questrade, CIBC Investor’s Edge or QTrade, instructs MoneySense. Both types allow an individual to buy and sell ETFs like stocks, but full-service brokerages provide client-manager advice and services at a higher cost, while discount brokerages cost less in trading commissions but come without expert advice.

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Full Answer

After choosing a platform, determine a method of analysis to base a strategy for trading ETFs, TD Ameritrade suggests. The two main analyses are technical, which relies on statistics derived from market activity using variables such as past prices and volumes, or on fundamental, which measures the value of an ETF based on information from economic, financial and Federal Reserve data.

To trade an ETF on a brokerage, the simplest method is a market order, explains ETF.com. In a market order, the price of the trade is dependent on the number of shares being sold, and the transaction goes through immediately at the current market buy or sell price. A limit order, on the other hand, places a maximum limit on price if you want to buy an ETF and a minimum limit if you are selling an ETF.

A limit order is a better method for smaller trades in a fluctuating market where there is a large gap between the buy and sell price of a share, states MoneySense. A market order is a better method for large trades.

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