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Which methods can I use to trade exchange-traded funds in my portfolio?


Hakiza

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Hi Hakiza,

Exchange-traded funds have many advantages over stock trading, one main reason why investors like dealing with investing in ETFs. They are primarily diversified, tax-efficient, and their expenses are lower than the individual stocks. However, the sweetness in ETFs is also accompanied by some risks of making losses.
However, you can carb these losses by engaging in a strategy that will allow you to enter the market when the prices are favorable and leave when the prices start to decline without any hindrances.
You can easily confuse exchange-traded funds with mutual funds since they are also diversified. However, in mutual funds, your trades will be executed when the market closes. You trade exchange-traded funds on exchanges, and you can enter and exit the market at any time. Through this, you can effectively use stop and limit order while trading.
One method you can use in ETF trading is swing trading. Swing trading tends to take advantage of price swings and can occur between a few days to several weeks. THE diversification and strict offer and ask spreads of ETFs make them suitable for swing trading. You are free to choose the asset you can invest in, depending on the knowledge you have.
You can also use sector rotation to trade ETFs; this will depend on the economic cycle.
Another trading method you can use is short selling. Most investors view this as a tricky way to trade and easily make losses in this strategy. Short trading in ETFs is, however, a better option in ETFs than trading individual stock. One reason is that the ETFs have lower borrowing costs. Short selling an ETF will also help you invest broadly.
Betting on seasonal trends is another trading method in ETFs. One most known seasonal trend you can capitalize on, especially if you are a beginner is the sell in may and go away. It is referred to this way since many stocks perform poorly between May to October to November to April. You can also trade between September and October due to strong gold demand in India. During this period, it is best if you sold in gold ETF. 
You can also employ hedging as your trading method. Hedging often aims at protecting your portfolio against certain risks.
These are a few techniques you can employ while trading ETFs. Your choice should mostly depend on the ETF you want to sell and the strategy that you create.

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