ETF Liquidity: Four Rules to Consider

By Direxion via

Liquidity, transparency, real-time trading, and relatively low management fees are the reason why ETFs are becoming more and more popular as investment vehicles. Still, there are key characteristics that investors should better understand, in order to trade them properly and seek the best order execution.

Of course the largest ETF names are the simplest to trade due to their tight spreads (difference between the bid and ask*). Tight spreads signal liquidity from the large volume of shares trading throughout the day. Traders feel comfortable that they can buy and sell, or sell short, these ETFs.

But what about ETFs that don’t have millions of shares trading every day? Here are four ETF trading tips you may want to consider:

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