How to Invest in ETFs on Plus500
Among the many investment opportunities that Plus500 offers in online trading, there are also ETFs. These are in addition to stocks, options, commodities, currency market, cryptocurrencies, indices and all the other financial instruments from which you can choose when trading with one of the best known and used platforms in Italy and Europe.
Although the operating principle is similar to that of the other assets, there are some typical characteristics of ETFs that it is useful to know if you intend to operate on them to make a profit.
ETFs or Exchange Traded Funds, investment funds whose units are traded on the stock exchange in the same way as shares and whose investment objective is to replicate the performance of a benchmark index. Among the most obvious advantages of ETFs are the diversification of the securities of the replicated index, the low management costs, the flexibility of its structure and the transparency of trading information. In summary, these instruments combine the increased security of the funds with the practicality of the shares.
Which ETFs to Invest in With Plus500
We have dedicated an entire section of our site to ETFs that can be traded with Plus500, so you can consult it both on our site (with all the details of each individual ETF) and on the Plus500 site.
How to Trade ETFs on Plus500
It was some specific strengths of Plus500 that decreed its success and popularity among the public. Among these, it should be noted the extreme ease of use, thanks to an easy and fast interface, which does not exclude a completeness and a wide range of options and choices applicable to trading. These two combined elements have made Plus500 one of the most widely used platforms, both for new and experienced traders.
As far as ETF trading is concerned, those who want to trade on ETFs should use this procedure.
- When you enter the main page of Plus500, click on the “Trade” command on the left hand side of the page.
- The command will open the complete list of tradable assets: among the items, there are ETFs
- Clicking ETF will open a sub-menu from which you have access to all available ETFs.
A list of names, in the middle of the screen, will indicate the values present on the platform on which you can trade.
Once the ETF fund of reference has been chosen, the trader can now decide whether to open a trade up or down, i.e. whether to place a Buy or Sell order.
What Does it Mean to Buy an ETF on Plus500?
Among the advantages offered by trading online at Plus500, one cannot forget the possibility of trading with CFDs, i.e. contracts that operate in conjunction with other financial instruments and follow their performance. With CFDs it is possible to trade both upwards and downwards, i.e. you can open positions that involve an increase or decrease in the value of the underlying instrument. If this change occurs in the expected direction, the CFD generates a profit.
In the case of ETFs, the trader will open a “Buy” position, or an “Upward” position, if he expects the value of a given ETF to increase over time: in the case of an actual increase, the profit earned will be proportional to the increase in the reference value.
The same happens in the opposite case: if the value of the ETF decreases, the trader will suffer a loss in the investment. A practically very common mechanism for those who play the stock exchange in the traditional way.
What Does Selling ETFs on Plus500 mean?
The trader can also decide to trade in the opposite direction, and bet, so to speak, on a future decrease in value. The user is therefore not obliged to buy a CFD linked to a financial instrument and hope to make a profit only in the event that this instrument rises: the two directions of oscillation are open to trading, and therefore involve the possibility of making profits at any time and in any market situation.
In the case of ETFs, the trader will open a “Sell” position, or a “Downward” position, if he expects the value of a given ETF to decrease over time: in case of an actual downward movement, the profit obtained will be proportional to the increase in the reference value.
Likewise, if the value of the ETF increases, the trader will suffer a loss on the investment.
How to Finalize an ETF Trade on Plus500
This is the theory behind CFD transactions on ETFs: if you actually want to order a position opening, be it up or down, you will need to click on the resulting command, and set your order. The items required to complete an opening operation are as follows:
- Contracts: Here the trader will enter the number of CFD contracts he wishes to proceed with;
- Leverage: Among the advantages of working with a platform like Plus500, the trader has the ability to lower the scope of his investment, i.e. the amount of capital required for his order, by using leverage. The service offered by the broker is expressed in a numerical ratio and allows you to lower your risk exposure by multiplying the value of your capital.
- Margin required: the scope of the investment on which the trader commits, after the intervention of leverage.
- Stop Limit: a useful function, by which the system is asked to automatically close the position when the desired share of profit is reached.
- Stop Loss: as in the previous function, but with regard to losses, the trader can set a maximum level of losses at which the position is automatically closed.
- Guaranteed Closure: This is an additional function, not applicable to all assets. As the name suggests, it consists of closing the position in the face of marked fluctuations in value. An additional cost is required by the broker to activate the function.
- Buy/Sell: here the trader chooses the direction of the value fluctuation in which he wants to invest: upwards or downwards.
Concluding a Transaction: Closing the Position
Once a position is opened, the trader can monitor the evolution of the market in real time to keep an eye on the fate of his investment at all times. Open positions, in addition to the already examined cases of Automatic Stop set at the opening and later, can be closed at any time by simply clicking on the “Close position” command. The system will credit the profits generated or load the losses directly into the platform’s account, in instantaneous time.
As we have seen, when you open a position it can be either Buy or Sell; once opened, the order to close it is the “Close position” command. It is important to underline that in order to conclude a trade you must not open a second one, in the opposite direction, and then order a Sell if you have chosen a Buy, and vice versa. CFD contracts are negotiable in both directions, and only the Close command can terminate them.
Further details, in addition to trading instructions, can be found in our definitive CFD trading guide.