Many times, traders tend to make a mistake by incorrectly selecting the buying and selling entry and exit points when trading. If a trader makes a mistake and buys an asset in the uptrend and then sells in the down trend, chances are they will lose their investment. Making such mistakes back to back can slowly deprive the investor of their hard earned cash. This type of loss can also have a psychological effect by reducing the investing confidence off the investor. To avoid making such simple mistakes when trading binary options online, it is advisable to deal with stocks that have relatively low volatility such as the low volatility exchange-traded funds. ETF’s are the best options for traders who want to avoid the hype associated with most stocks since they can comfortably participate in trading while being exposed only to minimal risks.

Options for Your Portfolio

Power Shares S&P 500 Low Volatility is the most established and the most common ETF available. This ETF tracks about 100 stocks in the S&P 500 index (SPX) which are of low volatility. The volatility is evaluated statistically based on the annual price fluctuations. SPLV is associated with a low expense ratio and each stock in this portfolio has equal weight and is usually rebalanced on a quarterly basis. By trading this ETF, an investor can collectively trade on large stocks which exhibit stability in their price movements. Including SPLV in a portfolio can help to eliminate the mistakes made when selling or buying assets at the wrong times.

Dividends wise, ETF’s fetch higher dividends as compared to other indexes which are growth oriented. For instance, comparing the SEC yield of the SPLV to that of the collective yield in SPDR S&P 500; SPLV will always have a higher yield than the latter. Although the SEC yields are separated by a small margin, it definitely means a lot. SPLV also has an edge in terms of income payday. SPLV income is usually paid on monthly basis as opposed to a quarterly basis and hence it is attractive to income seekers.

Another ETF that is worth a position in your trading portfolio is the EFAV (MSCI EAFE Minimum Volatility). EFAV has 205 stocks which are distributed in Australia, Europe and Asia. They also exhibit stable price movements like the SPLV. It comprises of large cap companies in UK, Japan and Switzerland. Unlike most ETF’s, EFAV is attributed to higher volatility when it comes to foreign markets. In this way, both SPLV and EFAV can help spice up a trading portfolio by minimizing the level of risk exposure and at the same time increasing the income potential.

Strategies Incorporated in ETF Trading Portfolios

Whenever stocks trade at valuations which are above their normal values, procuring a trading position in such a scenario can be a difficult task since the entry points are not always clearly defined. However, since the prices of ETF’s are slow and stable, entry points can be created at any point in time. Even if the unexpected happens, price movements will be relatively low and hence very minimal losses will occur in case an investor decides to sell off their trading position.

Savvy investors can use another strategy which entails using the ETF’s during market peaks. This move is aimed at reducing the beta of any investment. When trading SPLV and EFAV, it is advisable to rotate between the two while trading in order to maximize gains from the ETF’s.

Parting Shot

Trading ETF’s are generally associated with minimal risks and hence they are the best options for conservative traders. If a trader has a problem in identifying selling and buying points when trading traditional assets, it is advisable for them to venture into ETF trading first which offers low volatility.