Put These ETF Trading Strategies to Work for You

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You may have heard of ETFs and some of you even have them in your portfolios, but not many investors are aware of the diverse ETF trading strategies these assets have to offer. However, after reading the 14 ETF trading strategies listed below, you will be that much more of a savvy trader and have more weapons in your investing arsenal.

1. Invest in the Market with ETFs

Like an index, you can use ETFs to invest in the stock market or even play market volatility. There are ETFs for the NASDAQ like the QQQQs. There are ETFs for the S&P like the many SPDRs. There is a Dow Jones ETF (DIA). And for those who want to trade market vol, there are quite a few ETFs and ETNs that track the CBOE Volatility Index (VIX)

And you dont have to stop with those markets, there are many more markets just waiting for buyers and sellers, and there are just as many market ETFs that track them.

2. Use ETFs to Gain Exposure to an Industry

Maybe you dont want to invest in a market as much as a particular industry. Do you think producing clean coal is the next green advancement? Maybe a coal mining ETF is the way to go. Whether its financials, defense, or even technology, its much easier to buy an industry ETF than trying to corner the market in sector equities.

3. Invest in Commodities without Investing in Commodities

4. Foreign ETFs Give You Access to International Markets

Foreign investing can get complicated. Currency adjustments, foreign tax laws, and just general overseas challenges. However, there are ETFs that make international investing much easier. Foreign market ETFs, funds that are domestic currency-based, emerging market ETFs. broad foreign funds, and even ETFs than track individual countries like Brazil and China. Theres no longer any reason to fear investing outside the U.S. or any country. The world is yourETF.

5. Bond ETFs are the Gift that Keeps Giving

Bond investing in general can be difficult. Coupon rates, default risk, duration. However, a bond ETF can alleviate some of that complexity by giving investors one pre-packaged asset that gives instant access to the bond market.

6. What About ETNs?

Speaking of debt instruments, there are variations of ETFs known as ETNs, exchange traded notes. ETNs are assets issued by a major bank as senior debt notes — unlike ETFs which consist of securities such as commodities, currencies, futures, forwards, and options.

When you buy an ETN, you buy a debt asset similar to a bond, but the terms of the debt contract are determined by the structure of the note. ETNs are backed by a bank with a high credit rating, so they are pretty secure products. However ETNs are not without credit risk, just a lower level.

7. Play the Currency Market With ETFs

Bond ETFs and ETNs are two ways to play the interest rate market, but when it comes to foreign interest rate trading, look no further than currency ETFs. Whether you want to invest in a broad currency asset, a region currency like Europe, or even an individual country currency, ETFs have got you coveredliterally. Currency ETFs are a great way to hedge foreign risk, play foreign interest rates, or just invest in foreign currencies.

8. Playing ETFs on the Downside

For every buy trade, theres a sell trade on the other side. Most people associate investing with buying, but that only covers 50% of every trade. So it makes sense that there are ETFs specifically created for bearish investors.

Creating downside is possible by selling any ETF, but what if I told you that you can buy an ETF and still get short. Its true and its called an inverse ETF. Perfect for investors who have restrictions against selling, but want to get short; they can buy an inverse ETF.

9. Hedging Risk with ETFs

Again we come back to investing means buying. But a big part of investing is also protecting against risk. Thats where ETFs can help. Do you have a large diversified portfolio that wins when the market rises? Protect downside by selling a market ETF. Short a lot of oil stocks? Buy an oil ETF to protect your upside exposure. Long an index. Protect your position by selling an underlying ETF.

10. Hedge Indexes with ETFs