Trade ETFs intelligently
Transparent, inexpensive and broadly diversified – Exchange Traded Funds are attracting more and more investors. In order to fully exploit the strengths of ETFs, investors should pay attention to quality in trading.
More and more investors are using Exchange Traded Funds (ETFs) to invest flexibly and widely in different markets. They have come to know and appreciate the advantages of passive, exchange-traded index funds, such as their traceability, manageable management costs and protection as special assets. In addition, ETFs generally provide a certain degree of diversification, since they are based on a complete index. At the Stuttgart Stock Exchange, Germany’s largest trading floor for ETFs, investors have access to all of the around 1,200 ETFs that can be traded in Germany.
Index funds are now not only used by investors who want to structure their portfolios over the long term. A steadily increasing number of investors are also using ETFs to act tactically and respond to current market movements. For these short-term oriented investors in particular, the question of which trading venue to place your ETF order on comes to the fore. Because the strengths of the asset class can only be fully exploited if the quality in trading is right.
Stop loss is actively triggered
Active ETF investors want to be able to react to market events at all times. A basis for this are extended trading hours, such as those offered by the Stuttgart Stock Exchange. Here, ETF trading runs from 8 a.m. to 10 p.m. every trading day, i.e. until the stock exchange closes in the USA. This is accompanied by a service that makes a significant contribution to risk management, especially for ETF investors who trade intensively: At the Stuttgart Stock Exchange, risk-limiting orders such as stop-loss or trailing-stop are activated and thus triggered independently of turnover when the respective market level is reached. The stop order can then be executed as soon as possible. This is relevant for many ETFs that are rarely traded. Only those who place a stop order for such a security, which is triggered independently of turnover, can ensure that the order is executed at a price that is as close as possible to the selected limit and corresponds to the current market conditions. Without this protection, the investor could get an execution in a completely different market environment – and be in for a nasty surprise.
Speaking of price: In order to trade ETFs efficiently, investors should not only compare the transaction fees, but also the price quality of the different trading venues. Because the specific price of the respective ETF at the time the order is executed determines the implicit costs of the transaction – and thus has a significant impact on the overall performance of the investment. For example, if an investor buys 1,000 shares of an ETF and sells them again, a price that is one cent better each time means a saving of 20 euros.
Price quality counts
This is why Boerse Stuttgart offers the highest price quality in ETF trading. This is not only ensured by the market makers, who transmit their spreads from buy and sell prices and thus set the framework for price determination. In addition, trading experts are also involved in electronic trading: They donate additional liquidity in special market phases and order book situations and balance supply and demand even within the market maker price range. As a result, the majority of ETF orders in Stuttgart can be executed at prices that are within the market maker spread. Better prices are therefore often available on the Stuttgart Stock Exchange than elsewhere on the market. This is especially true in the off-peak hours when spreads can widen due to lower overall market liquidity. In Stuttgart, the trading experts mitigate this effect with their liquidity donations – to the benefit of the investor.
In ETF trading, private investors in Stuttgart will also find other conditions that are tailored to their needs. The trading experts personally check many of the incoming orders for plausibility. However, investors do not have to do without fast order execution: Around 80 percent of all orders for ETFs in Stuttgart are executed within three seconds, 90 percent within ten seconds. Boerse Stuttgart offers self-determined investors significant added value throughout the trading hours from 8 a.m. to 10 p.m. – especially for orders that involve additional risk factors due to their size, the product being traded or the current market situation. If you play it safe here in terms of trading quality, you have more freedom for a well-founded product selection and careful timing of your ETF investment.