As I was teaching a Trading Plan course in Online Trading Academy’s Stamford center today, I was asked why prices on some ETF’s did not always reach supply or demand before turning sharply. The student was upset because they were missing trades or even getting stopped out too early.
ETF’s or Exchange Traded Funds are securities that represent ownership in a basket of stocks. They are similar to a mutual find in that you gain diversification from participation in multiple securities and can even receive dividends. But unlike mutual funds, they trade like a stock and can be bought or sold at anytime during the trading day or after hours trading session. The ETF is also passively managed, meaning that there are no managers constantly changing the basket composition.
Some of the most popular ETF’s are the ones that track the major indexes or commodities. … Continue Reading
