How to Day Trade ETFs Profitably – What You Need to Know!
How to Day Trade ETFs Profitably – What You Need to Know!
Exchange-traded Funds (ETFs) trade like stocks, but look like mutual funds. They are designed to replicate and track an underlying index. ETFs are relatively new with the first and most popular being the SPDR S&P 500 ETF, also known as SPDRs (“spiders”). It tracks one of the most popular indexes in the world, the S&P 500 Index.
Buying and selling ETFs can be good for ‘Investors’, but are they also good for ‘Day Traders?’
Well, let’s take a quick look.
ETFs enjoy continuous pricing; they are bought and sold on the market throughout the trading day. They have swing highs and swing lows which make for very profitable trading opportunities. Because ETFs trade like stocks, you can place orders just like you can with stocks and they can also be sold short!
So, yes, not only are they good for investors, but they are absolutely GREAT for day traders!
The Best EFTs to Day Trade?
Highly profitable ETFs that day traders should seek are the SPY – FAS – FAZ. These funds move very quickly and offer substantial profit-taking opportunities for day traders.
Here’s a quick overview:
SPY – US SPDR S&P 500 ETF Trust
This investment seeks to correspond generally to the price and yield performance, before fees and expenses, of the S&P 500 Index. SPDR Trust is an exchange-traded fund that holds all of the S&P 500 Index stocks. It is comprised of undivided ownership interests called SPDRs. The fund issues and redeems SPDRs only in multiples of 50,000 SPDRs in exchange for S&P 500 Index stocks and cash.
FAS – FINANCIAL BULL 3XNEW
Direxion Daily Financial Bull 3X Shares seeks daily investment results of 300% of the price performance of the Russell 1000 Financial Services Index. This Financial Index is a capitalization-weighted index of companies that provide financial services. The Fund creates long positions by investing at least 80% of its net assets in the equity securities that comprise the Financial Index. The Fund will also invest in financial instruments that, in combination, provide leveraged and unleveraged exposure to the Financial Index.
FAZ – FINANCIAL BEAR 3XNEW
Direxion Daily Financial Bear 3x Shares seeks daily investment results of 300% of the inverse (or opposite) of the price performance of the Russell 1000 Financial Services Index. This Financial Index is a capitalization-weighted index of companies that provide financial services. The Fund does not invest in equity securities. The Fund creates short positions by investing at least 80% of its net assets in financial instruments that, in combination, provide leveraged and unleveraged exposure to the Financial Index, and the remainder in money market instruments.
Conclusion
Although most ETFs are passively managed for buy-and-hold investors, day traders can take advantage of the daily swings in the fund on a pure speculative basis. Day trading ETFs can be very lucrative in that an ETF most resembles an index fund that tracks the same index and its performance should closely mirror the index it tracks.
There are so many different strategies that can be employed when using ETFs. Like any investment, it is important to evaluate the different options to ensure the right ETF is chosen for the job.
