Exchange traded funds (ETFs) are great for the buy-and-hold kind of investor, but increasingly traders are turning to them to dodge the perils of single-stock trading.
There’s a downside, though: while ETFs can have a smoother price movement than a single stock, it also means that traders either have to take a bigger position or increase the duration of their trades to get those same results, says David Penn for Trading Markets.
One solution to the problem for traders is using leveraged ETFs. The same trading strategies apply, but because they maximize movement in the index, the potential for greater returns is more competitive with those of stock trades.
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