Tom Lydon's  Instablog

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The exchange traded fund (ETF) price war has a new combatant: Fidelity. On the heels of Charles Schwab's lead, the mutual fund provider has slashed what it costs to buy stocks and ETFs through its online brokerage platform.

Fidelity has lowered its commission to $7.95 on trades through its site. And if you opt to trade certain iShares ETFs, commissions are completely free. The 25 iShares funds offered up for commission-free trading cover a range of major indexes and asset classes, including:

• iShares MSCI Emerging Markets (NYSEArca: EEM)
• iShares MSCI EAFE Index Fund (NYSEArca: EFA)
• iShares Barclays Aggregate Bond Fund (NYSEArca: AGG)
• iShares Russell 2000 Index Fund (NYSEArca: IWM)

For a full list of the free ETFs, click here.

Paul Justice at Morningstar says that Fidelity likely selected the iShares ETFs it did because they're important to building strong core portfolios and tend not to be heavily traded by smaller investors. The hope is that Fidelity will lure investors looking for free iShares trades and then keep them around to trade other products.

The new, lowered commission will slash trading costs for Fidelity's smaller customers by 60%. Commissions had been as high as $19.95. Here's the catch: to take advantage of the savings, customers must trade at Fidelity.com and have at least $2,500 in taxable accounts. The partnership could be a strongly competitive alliance: iShares holds 50% of the ETF market share.

Fidelity's lower prices are just the latest in the ETF price wars. When Schwab unveiled its new ETFs, it announced that all its proprietary funds would be commission free when traded at Schwab. The brokerage also lowered commissions for all trades to $8.95. [Schwab's ETFs opening doors.]

Other brokerages are also offering appealing deals. TD Ameritrade charges $9.99 a trade, E*Trade charges $12.99 to customers with less than $5,000 in assets. [How low can fees go?]

Fidelity's announcement could be a harbinger of what's to come: there's going to be a race with the big discount brokers to offer competitive pricing because ETFs are no longer small fry. In fact, ETF trading now accounts for 50% of all trading on exchanges.

Brokerages are in heated competition for ETF assets from both advisors and individual investors.

We're getting ever closer to having discount brokerages offer "ETF supermarkets," where you'll eventually be able to trade a majority of ETF commission-free.

Disclosure: Tom Lydon's clients own shares of EEM.

When it comes to investing in stocks, bonds and exchange traded funds (ETFs), we’ve all made wrong decisions. But good news – there are ways to right these wrongs.

Doug Kass of The Street.com suggests the following ways to avoid large losses when a tactical view is wrong. We also threw in a few of our own:

• Always stay on top of fundamentals and stay on top of industry specialists. Why is your position doing well, and will it continue to do well?
• Use out of the money puts/calls as protection if you feel that it’s necessary. This isn’t for everyone, though.
• Don’t press losing positions – employ your exit strategy and find another spot that’s trending up instead.
• Accelerate every portfolio holding by rechecking the fundamentals at  a 5% to 7% loss and have a reasonable stop loss; a stop loss that’s too high could leave you suffering large losses, while one that’s too small could have you buying and selling more frequently. Our stop loss is 8%.
• Maintain a diversified portfolio – doing this with ETFs is easy.
• Watch the trend lines – use them as your guide as to when to get in and when to get out.
• Do your homework and know what is under the hood of the ETFs in which you’re investing. Don’t simply rely on the names of funds or other assumptions – do your due diligence.
• Use limit orders instead of market orders. Here’s why.
• Be open to new opportunities – trends are always shifting and with all the different asset classes that are now available (global regions, commodities, currencies), new trends are always developing.
• Have forgiveness – you’re only human. But with practice, you can become a pro at sticking to your strategy and making it work for you.

For more stories on trend following, visit our trend following category.

Kevin Grewal contributed to this article.