Curious about trading ETFs? A smart way to start! Exchange-Traded Funds (ETFs) are a fantastic way to dip your toes into the markets without putting all your eggs in one basket. ETFs deliver diversification, low cost, and trading convenience. What’s not to love?

But before you jump in, let’s break down the benefits and some common mistakes traders make so you can trade smarter from the start.

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Why trade ETFs?

ETFs track an underlying asset, like stocks, commodities, or indices, and trade just like regular stocks. They give you exposure to different markets without the hassle of picking individual assets. What makes ETFs stand out?

They’re simple, transparent, and cost-effective.

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The perks of ETFs

1. Transparency in holdings

ETFs are legally required to disclose their holdings daily. That means you always know what’s inside your ETF. Your holdings are visible. No surprises.
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2. Instant diversification

Exposure to multiple assets through a single investment? ETFs spread your investment across multiple assets, reducing risk and giving your portfolio some balance.
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3. Easy access to global markets

Want to invest in tech, emerging markets, or even gold? There’s probably an ETF for that! ETFs open doors to markets that might otherwise be hard to access.
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4. Low fees and intraday trading flexibility

No high management fees like mutual funds. Plus, you can buy and sell ETFs throughout the trading day, just like a stock.
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5. Flexibility for any strategy

Whether you're investing long terms or trading actively, ETFs suit diverse strategies. Hold for years or trade on short-term trends. The choice is yours.

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Common ETF trading mistakes (and how to avoid them)

Even though ETFs are beginner-friendly, there are a few pitfalls traders often fall into. Here’s what to watch out for:

1. Overlooking fundamental ETF research

Not all ETFs are created equal! Check the ETF’s holdings, expense ratio, and performance history before buying. Some ETFs are heavily concentrated in a few stocks, which can increase risk.
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2. Trading too much

More trades don’t always mean more profits. Overtrading racks up fees and taxes, which can eat into your returns. Often, patience pays more than frequent trading.

3. Chasing past performance

Just because an ETF did well last year doesn’t mean it’ll do the same this year. Market conditions change, so focus on strategy, not just historical success.

4. Ignoring diversification

Yes, ETFs help diversify your portfolio, but relying on just one ETF can still leave you exposed. Mix it up with ETFs covering different sectors, industries, and regions.

5. Forgetting stop-loss orders

Markets can turn sharply — protect your positions with stop-loss orders. A stop-loss order helps you manage risk by automatically selling your ETF if the price drops below a set level. It’s a smart way to protect your investment.

6. Not checking liquidity

Low-liquidity ETFs can have wider bid-ask spreads, meaning higher trading costs. Always check trading volume before diving in.

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Get started with ETF trading

With a better understanding of ETF benefits and pitfalls, you’re well on your way to making informed trading decisions. Ready to practise ETF trading without risk? Start practising cost-free with a Deriv demo account and explore our ETF offerings!