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CFDs are leveraged products and can result in the loss of your capital. Rankings are influenced by affiliate commissions. All information collected on 1/11/2017.

The Ultimate Guide to

Choosing a Broker
For ETF

Not sure which broker is right for you?

Don’t worry - we’ve got you covered. In this guide, you’ll learn:

Ready?

Part 1

Why Choose
For ETF?

scored best in our review of the top brokers for etf, which takes into account 120+ factors across eight categories. Here are some areas where scored highly in:

  • + years in business
  • Offers + instruments
  • A range of platform inc.
  • 24/7 customer service
  • Tight spreads from pips
  • Used by 0+ traders
  • Offers demo account
  • 0 languages
  • Leverage up to

offers one way to trade: . If you wanted to trade FTSE100 through copy trading or other means, skip to part two.

The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.

have a trust score, which is . This is largely down to them being regulated by , segregating client funds, being established for over years, and much more. For comparison:

Trust Score comparsion

Trust Score
Year Established
Regulated by
Uses tier 1 banks
Company Type Private Private Private
Segregates client funds

The second thing we look for is the competitiveness of the spreads, and what fees they charge. We've compared these in detail in part three of this guide.

Part 2

Who is (& Isn’t)
Suitable For

As mentioned, allows you to trade in one way: .

Suitable for:

  • Spread Betting
  • CFD Trading
  • Forex Trading
  • Social Trading

Not Suitable for:

To trade with , you'll need a minimum deposit of $. offers a range of different account types for different traders including a , .

Finally, isn't available in the following countries: . They do not offer islamic accounts either.

Part 3

A Comparison of vs. vs.


Want to see how stacks up against and ? We've compared their spreads, features, and key information below.



Spread & fee comparsion

The spreads below are illustrative. For more accurate pricing information, click on the names of the brokers at the top of the table to open their websites in a new tab.
Fixed Spreads
Variable Spreads
EUR/USD Spread
GBP/USD Spread
DAX Spread
FTSE 100 Spread
S&P500 Spread

Comparison of account & trading features

Spread type
EUR/USD Spread
EUR/GBP Spread
Crude Oil Spread
Gold Spread Private Private Private
DAX Spread

Part 4

ETFs – Exchange Traded Funds

There’s something to be said for the dart board method of investing: buy the whole dart board.” – Peter Lynch arguing in favour of index ETFs.

What are ETFs?

Exchange Traded Funds (ETFs) are financial products that combine the pooled asset features of a mutual fund with the trading capabilities of common stocks. As with mutual funds, a trader buys shares/units in an ETF at the Net Asset Value to own a proportional interest. But unlike mutual fund units, ETF units have high liquidity and can be bought and sold in global exchanges through brokerage accounts throughout the trading day. ETFs are continuously priced in the market and can be margined, lent, shorted or could be used as the underlying asset for derivative contracts.

ETFs are generally designed to meet particular investment objectives, mostly passive in nature. Initially ETFs were designed to track the price movements of major equity market indexes and such ETFs continue to be predominantly popular among American traders. However multiple ETF varieties have emerged that track sectorial indices, global indices, bond and commodity prices. According to ETFGI, the global assets in ETFs were valued at $2.9 trillion in 2015. In July 2017, assets in European exchange-traded funds were valued at $662 billion, with around 6000 listings on 26 exchanges, and over 1500 ETFs in total. They are a very popular product among institutional and retail traders alike.

Types of ETFs

The major varieties of ETF are outlined below:

  • Broad based Equity Index ETFs: these ETFs track popular market indices such as S&P500, NASDAQ composite, NASDAQ-100 etc.

  • Sectorial Equity Index ETFs: These ETFs track the movement of industry specific indices and allow the investor to take exposure to particular sectors such as finance, technology, consumer goods etc.

  • Global Equity Index ETFs: These ETFs track movements of global market indices and allow traders to get easy exposure to promising equity markets beyond the boundaries of their native country.

  • Bond index ETFs: These ETFs track index movements of federal and corporate bond markets.

  • Commodity ETFs: Commodity ETFs track prices of a wide range of commodity products such as precious metals, agricultural products etc.

Benefits of Trading ETFs

  • Cost: The annual fees for an ETF fund is much less than actively managed funds because of the lower churn rate of the portfolio, which leads to reduced incidences of capital gains taxes.

  • Diversification: As ETFs invest in all or a representative sample of securities in a particular index, the portfolio base becomes highly diversified.

  • Liquidity: Liquidity of a good ETF is comparable to that of a common stock. ETF units can be continuously traded at the listed price, just like stocks.

  • Transparency: The ETF issuer provides information to the market regarding the ETF portfolio and the NAV value is continuously updated on the exchange as the market price of an ETF unit. This makes ETFs a very transparent investment vehicle.

  • Speculative contracts: Market indices provide a good representation of overall market trends. Hence, Index ETFs serve as an excellent asset base for speculators and hedgers to take a position based on their market view, and provide a conducive environment for the development of a healthy derivative market around them.

ETFs Trading Strategies

  • Core – Satellite Strategy: A common asset allocation strategy in which a large chunk of the portfolio (core) is invested in a passive product like a Market Index ETF, benefiting from systematic risk of the index, while actively trading the remainder of the assets. Because of the low tracking error that ETFs offer, they have become a popular product to be used in the core of an investment portfolio.

  • Cash Equitisation: Due to the high liquidity of ETFs they can be used to reduce cash drag in case of sudden capital inflows. Funds can be directed to the index while more suitable avenues are considered. When the right opportunity comes up, ETFs can be liquidated easily to purchase new assets.

  • Shorting ETFs: As ETFs trade just like shares, this make it possible to short the whole index and take a pessimistic speculative stance on the market. SB&L markets around ETFs are constantly growing which ensures that ETFs are abundantly available for borrowing to meet shorting obligations.

  • Pairs Trading: Due a wide spectrum of ETF varieties available in the market that follow various global indexes, they can be utilised for pairs trading. For example, if it is predicted that Indian stock markets could outperform the emerging markets index, then it’s possible to go long on Indian NIFTY50 and short on the MSCI emerging markets index.

  • Trading Using CFDs: ETF indexes provide an excellent asset base for CFD trading, where an agreement is made with a counterparty to exchange the difference in NAV between the start date and the closing date of the contract. Traders can take a speculative stance on the whole market by either going long or short on the broad index, and take an exposure much greater than the amount paid by utilising leverage. ETF CFDs provide hedging benefits by balancing out price movement. For example, if crude oil prices go down then the stock price of downstream oil companies in the energy ETF goes up and net losses are minimised.

Trading ETFs with Plus500

Trading ETFs as CFDs with Plus500

ETF Trading with Regulated Brokers

Trading ETFs with regulated brokers provide multiple advantages such as:

  • Regulated brokers are well supervised by authorities which makes trading with them much more secure

  • Many varieties of ETFs are available for CFD trading, such as equity, global equity, sectorial equity, commodity etc.

  • Spreads offered are quite competitive

  • Leverage can be as high as 1:100 with regulated brokers such as Plus500

  • Online and telephone customer support

Summary

Among the recent innovations in financial instruments, ETFs have been of great significance. They have provided traders with new opportunities to fine tune their trading strategy. At the same time, they have given the retail trader a vehicle which is well diversified, liquid and cheaper than mutual funds. Index ETFs that track broad markets have opened up many speculative opportunities for market participants.


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