ETF trading lessons of the recent stock market Flash hit on May 6, 2010!

As a stock trader or an ETF trader you must be wondering what happens in the world happened that day and how you can take care to avoid such unpleasant one trading day. So, let's discuss what happened that day and that lessons as a stock trader or a trader of the ETF.

Populations were already having a bad day on 6 may due to the debt problem and riots in Greece, the elections in the United Kingdom, credit freeze in Europe when subjects were from bad to worse the catastrophic even for some blue chip stocks.In a matter of a few hours, the Dow JONES had lost something like 1000 points but fortunately things back to normal soon.

Now, can be traded ETFs like shares throughout the day without any problem.But not on the same day As the stock market plunged, liquidity dries quickly. When the circuit breakers in the New York Stock Exchange (NYSE) stopped trading of certain stocks, ETFs based these shares plunged too.

Within minutes, stocks and ETFs were being sold from 50 to 90% discount. Let's take the example of iShares Russel1000 Growth (IWF).This is an ETF popular with approximately three million actions being traded daily. what this means is that you have good liquidity. But on May 6 before the stock market plunge, shares of IWF were selling for $ 49.70 and $ 44.23 and just $ 19. 98. But I hope that when the market has become normal, prices of IWF ETF also returned to $ 49 per share.

Then this flash stock market crash of real was not an accident, but he panicked almost all market participants. It is expected that the market was soon back to normal. However while thinking about this stock market crash of brief, the following lessons are very important and you should think about them;

1. always use limit orders and avoid placing market orders.

2. Always think before you put the Stop Loss.Keep on Updating the Stop Loss, as its stock or ETF price increases. otherwise, you have to sell their shares or ETF a much lower price than you wanted.One way of doing this is the EU a mental stop loss.You can also use a trailing Stop Loss.

In any case, this bag Flash crash frightened many marketers. many experts blame computerized trading for such failures of stock market flash. you must be careful as it can be repeated again!

Mr. Ahmad Hassam did masters degree at Harvard University. read this free 52-page guide ETF Trading. watch this strange Stock Trading video 30 minutes only now!