etf trading signals

Aside from stocks and cryptocurrencies, you can also trade an exchange-traded fund (ETF), which is a pooled type of investment security with similar features of mutual funds and stocks. Be aware though that the share prices of an ETF fluctuate within a day, and thus, having an automated system that identifies lucrative ETF trading signals can help in making your trading activities more convenient and efficient.

What is an ETF?

An ETF is essentially a bundle of securities that can be bought and sold on an exchange. Any type of investment can be basically put together into an ETF e.g. stocks, bonds or commodities. The ETF can be focused on a certain investment type or on a diverse group of securities. It can also focus on a specific industry, a sector or a specific investment strategy. Furthermore, the assets in an ETF can also be based on a category such as global securities or US-only stocks.

In essence, the diversity of assets included in ETFs can be confusing to traders, especially the amateur ones. Thus, having an automated system that provides alerts on auspicious ETF trade signals can be beneficial in ensuring you’re making the most of any opportunity available to you in real time.

ETF vs. Regular Stocks

Both assets are tradable on the stock market within the trading day, but they have differences too.

Regular stocks essentially have a single underlying asset while an ETF contains multiple assets, which are perfect for traders who prefer to conveniently diversify their portfolio. While you can become a retail investor or trader of regular stocks, an ETF requires an institutional trader (fund manager) who manages the diversification of the underlying assets of the fund. In short, you won’t have control over what happens to the portions of the ETF, unlike your hold on regular stocks.

On the other hand, ETF and stocks are both taxable and can provide an income stream. They also offer multiple options and can be obtained on a margin and sold short. 

When it comes to selling short, you expose yourself to a high risk-reward ratio, which means that you may be able to enjoy big profits but losses can quickly and infinitely rise with the wrong strategies. Luckily, you can utilize the Monster Short automated system in taking advantage of bearish markets by shorting stocks. It uses the Heatseeker technology to track thousands of securities every day so you won’t have to.

ETF vs. Mutual Funds

The major similarities of both funds are that they contain a mix of various assets and are generally handled by a fund manager. However, mutual funds can only be bought at the end of the trading day based on the calculated net asset value while ETFs are tradable within the day in an exchange. In essence, the price of ETFs often fluctuates while they’re sold and bought within the trading hours.

Types of ETFs

ETFs can either be active or passive, which refers to how the funds are managed. A passive ETF essentially tracks and replicates the performance of either a diversified index or a more specific target trend or sector. Active ETFs, on the other hand, are handled by portfolio managers who make decisions on what to buy or sell for the fund.

Below are some types of active ETFs:

  • Bond ETFs may contain government, corporate and municipal bonds, and provide regular income. While the underlying bonds have maturity dates, the ETFs don’t expire. 
  • Stock (equity) ETFs contain stocks of companies. They’re considered less risky than owning a portfolio of individual stocks.
  • Industry/Sector ETFs focus on company stocks and other securities in a single industry or sector. There are 11 sectors in the US stock market including Energy: XLE (energy developers), Real Estate: XLRE (companies engaged in buying and selling property) and Consumer Staples: XLP (manufacturers and distributors of primary goods).
  • Commodity ETFs can include gold, crude oil and other commodities. They’re usually beneficial in hedging downturns in the stock market.
  • Currency ETFs track performance of currency pairs.
  • Leveraged ETFs will return some multiples on the returns of the underlying securities, allowing you to gain bigger profits or incur bigger losses than the gain/loss of the underlying asset.
  • Inverse ETFs allow you to earn gains as the prices of underlying securities decline, and thus, perfect for traders who’s into shorting. Furthermore, inverse ETFs can also be leveraged ETFs, too. Be aware though that most inverse ETFs are not true ETFs, but exchange-traded notes (ETNs), which are unsecured debt securities.

To make the most of your trading activities and take advantage of ETF trading signals as timely as possible, be sure to use an automated trading system that tracks more than 840 different ETFs every day and provides real-time alerts on exit and entry point ETF opportunities.

For more information on ETF trade signals and how you can achieve success in your trading endeavors, get in touch with Monster Trading Systems today.