Currency Exchange-Traded Funds (ETFs) are a fantastic way to gain from fluctuations in currency values. It is so much easier to trade in ETFs compared to Forex and Futures.

Not only can you trade ETFs through your 401(k) account or your Individual Retirement Account (IRA), but it also offers wonderful opportunities for protecting dollar-dominated assets from price fluctuations.

ETFs also offers superb alternatives for tracking major equity indices. Comparing ETF currency trading over forex trading, a few advantages emerge.

Ease of Trade

To trade in forex, you need to find a forex broker even if your investment portfolio is usually handled by a different stock broker or asset manager. With currency ETF, you can purchase and sell your currency at any time through any type of broker.

If you already have a financial broker handling your equity and other trades, the same broker can easily handle your ETF sales and purchases.

Tax Efficiency

Currency ETF trades usually exhibit a much lower portfolio turnover compared to financial instruments such as forex and mutual funds. This is meant mainly to minimize distributions of capital gains so that any ETF investor only gets taxed for initiated trades.

Transparency

Just like the forex market, with currency ETF the trader enjoys greater transparency compared to most other traded financial instruments.

With ETF, holdings are disclosed on a daily basis and as such, the investor can always accurately determine what is being paid for and the value of what is owned.

Flexible Trades

Currency ETF trades offer highly flexible trades. For instance, you can short your trades, place all types of limit orders, and hold your trade resources in margin accounts.

Anything you can do through your forex trading platform is possible through your ETF trades.

Cheaper Transactions

Currency ETFs typically attract very low management fees compared to forex spreads. This makes it more practical, economical, and profitable to trade currency through ETFs rather than through a typical forex account.

The lower charges are even more obvious when making trades that do not involve the US dollar in the exchange pair.

Currency Tracking

If your analysis shows that a particular currency is set for a great run, you can purchase ETFs to track that particular currency.

On the other hand, a trader may also opt to track a basket of different world currencies by purchasing one or more ETFs.

Active Strategies

Financial analysis methods used for forex trading work well but may be too complex for the untrained. However, with ETFs, a trader can take advantage of diverse, easy to follow strategies that track the highest yielding currencies.

For instance, the DB G10 Currency Future Harvest Index work as a wonderful tracker for G10 currencies pitting the highest yielding against the lowest, thus resulting in maximum trade profits.

Hedging and speculating is much easier to understand and follow when using ETFs rather than relying on traditional forex analysis methods.

Conclusion

Trading in currency ETFs can easily allow the currency trader to diversify in exchanges away from dollar pairs.

This increased flexibility is cheaper and provides faster transactions. ETFs are also better regulated thus chances of rogue or scam brokers fleecing their clients are minimized.