Exchange Traded Funds (ETFs) keep growing in popularity.

This is surprising when you consider they are really nothing more than mutual funds. And, quite frankly, the last thing the financial world probably needs is another mutual fund.

However, ETFs are different. To fully appreciate the difference, consider the following:

• They trade like stocks

• They trade on exchanges

• They can be purchased on margin

• They can be sold short

Is it any wonder their popularity keeps growing? Not when you realize they keep meeting the damands of traders, investors and institutions. Currently numbering in the hundreds, ETFs cover about any investment area you can imagine. And their numbers keep growing.

ETFs are really tracking funds for an underlying index, industry, commodity or other sector. For example, SPY is a tracking fund for the S&P 500 Index and trades at one-tenth the price. GLD is the tracking fund for gold and it trades at one-tenth the price. So, if gold is selling at $640 an ounce, GLD will sell very near $64.

What does this mean? Simply this...you can trade them like stocks...long or short...on margin...at one-tenth the price...and at the same commissions you pay for stocks.

ETFs were popular from the start but this was only the beginning. They were so successful they spawned the creation of numerous other funds such as Vipers, Diamonds, and Qubes.

ETFs are now available that cover market indexes, foreign markets, countries, industries, small cap stocks, commodities, and many other sectors. You name it and an ETF probably exists or is currently in the works.

Because they trade like stocks, traders have more opportunities than ever before to develop winning strategies. That's why they like them so much. Rather than being limited to trading individual stocks, they can now trade an index, a particular industry such as healthcare, or an underlying commodity like gold.

If you believe a market move is imminent, you now have another choice. For instance, there may be times when you believe trading 500 stocks or the underlying commodity makes more sense than a single stock.

But you're not limited to the S&P 500. You can also trade Diamonds which track the Dow Jones Industrials and Qubes which track Nasdaq. And, if that's not enough, try foreign markets or particular industries.

Whatever your choice, the fact is that many traders believe it is easier to time broad market moves than moves in individual stocks. They know that news about a specific company or its industry often has a large impact that is only minimally reflected, if at all, in the price of an index.

This is why many traders choose to trade index ETFs.

But this is only one of many ways traders use them. Because of the wide reach of ETFs, they use them in trades based on industry sectors, geographic regions, interest rates, and others. In fact, their use is perhaps limited only by a traders imagination.

And then there are the characteristics of ETFs themselves which help dictate how they are used. For one thing, they are usually less volatile than stocks. For another, they are ideal for quick trades when the underlying index or commodity is breaking out of a trading range or congestion area.

And there is the added feature of selling them short on a downtick. As you know, this is something you can't do with a stock.

If you're a trader or interested in trading stocks, you owe it to yourself to consider ETFs. Quite simply, they give you more trading options. And it's all because they trade just like stocks.

Thomas McNatt is a trader with over 20 years trading experience. He has traded full time for the last 8 years. His website can be found at http://www.trading-stocks-profits.com