How to trade ETFs

• ETFs trade during market hours not 24 hours a day
• Time of day can affect how easily you get the price you want
• Every ETF has a bid and an ask price and the difference affects the price you get
• Using a limit order can help you stay in control of the price you pay or receive

If you’re comparing ETFs to mutual funds, it’s important to know that one of the biggest differences is how they are priced. 

With ETFs, you see a live market price and can choose when to buy or sell during the trading day.

With mutual funds, all trades are processed at the end of the day. You won’t know the exact price until the market closes no matter when you place your order.

That means ETFs give you more control, while mutual funds offer a more hands-off approach.

That added flexibility can be helpful but it also puts more emphasis on when and how you trade.

Even though ETFs trade throughout the day, not all times are equal.

The first and last few minutes of the trading day can be more volatile. Prices may move quickly, and the gap between buying and selling prices can be wider.

For many investors, it may make sense to trade after the market has settled and before activity picks up again near the close.

When you look at an ETF, you’ll see two prices:

• Bid: The highest price someone is willing to pay
• Ask: The lowest price someone is willing to sell for

The total difference between the bid price and the ask price is called the spread.

It’s the gap between what you pay and what you’d receive if you bought and sold at the same time.

In many ETFs, the spread is small but it can be wider in less active or more complex funds, or in certain market conditions.

A market order fills your trade at the best available price at that moment.

A limit order lets you set the price you’re willing to pay — or the minimum price you’re willing to accept when selling. 

For example, if an ETF has a bid of $19.95 and an ask of $20.05, a market order will typically fill near the ask price when buying. A limit order lets you choose the maximum price you’re willing to pay for an ETF, such as setting a $20.00 limit for buying ETFs.

Limit orders can be a simple way to stay in control of the price you pay or receive, especially when spreads are wider or markets are moving quickly.

If the market doesn’t reach your limit price during the trading day, your day order won’t be filled. You can choose a custom date to keep it open longer if needed.

Some ETFs track markets outside of Canada or the U.S.

If that market is closed, the ETF may still trade but pricing can be less precise, often reflected in wider spreads.

If possible, it can help to trade when that market is open.

Before trading, check the ETF’s trading volume and liquidity. Less active ETFs may have wider spreads and less predictable pricing.

Bond ETFs can behave a bit differently from stock ETFs.

Because bonds often trade less frequently than stocks, prices may update more gradually during the day. As a result, bid/ask spreads can sometimes be wider, especially in less active markets.

That doesn’t necessarily make them harder to trade — but it makes using a limit order even more useful.

ETFs are designed to be easy to trade — and in most cases, they are. 

By paying attention to timing, spreads, and order types, you can trade with more confidence and avoid a few common surprises.