ETFs are a great investment since they’re diverse, not to mention they’re readily available in their information and historical data. However, ETFs are usually considered long-term investments. So, can ETFs be day traded and, if so, are they good for day trading?
You can day trade ETFs just as you would trade them in any other way. Although known as long-term investments, ETFs are great for day trading because of the diversification that they offer, the relative ease of trading them, and the abundant market insights available to predict their future value.
In this article, I will explain how you can day trade ETFs, the benefits of day trading them, and some tips you should follow when day trading these financial instruments. There are also some resources recommended at the end of this article that can help you to learn more about day trading and ETFs.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
How To Day Trade ETFs?
Day trading is buying and selling a security on the same day. You can trade multiple shares on the same day, but day traders almost always opt to sell all of their shares before the market closes.
Like stocks, ETFs trade on an exchange, and the market is open on weekdays for a certain period, with the exception of holidays. In the United States, the market is open from 9:30 AM to 4 PM Eastern time. If you want to trade ETFs, you’ll have to buy them after the market opens, then sell them before the market closes.
To trade ETFs, whether by day trading them or any other way, you need to open a brokerage account. This then allows you to buy, sell, and manage your ETFs through your account.
There are many ETFs out there good for day trade. Still, you’re going to need to decide which ones are best for you and for the day you’re trading. As you trade more, you’ll become more familiar with the different ETF types that are best for trading.
However, as a beginner ETF day trader, you may need help choosing which ETFs are good for day trading while you work towards perfecting your strategy. If that’s the case for you, here are the top 7 ETFs that Investopedia recommends for day trading:
- Vanguard S&P 500 ETF (VOO)
- iShares Core S&P 500 ETF (IVV) and SPDR S&P 500 ETF Trust (SPY)
- Vanguard Total Stock Market ETF (VTI)
- Schwab U.S. Broad Market ETF (SCHB)
- iShares Treasury Floating Rate Bond ETF (TFLO)
- iShares 20+ Year Treasury Bond ETF (TLT)
- Schwab U.S. TIPS ETF (SCHP)
Benefits of Day Trading ETFs
While ETFs can be good long-term investments, they’re also good for day trading for various reasons:
- ETFs, in general, are a great investment because they’re diverse. Each ETF has at least several, sometimes hundreds, of securities within it. So, even if one or some of the securities lose value, it’s unlikely that all of them will. And, while some lose value, others can gain value enough to net your investment or even still get you a net gain.
- There are so many resources you can use to guide you with day trading. Since ETFs are traded on the market, you can track them, find predictions and events that might cause them to fluctuate, and analyze them based on their data and history. There are many resources online that’ll teach you more about day trading and ETFs.
- Since ETFs trade by share, you can trade as many or as little as you want. When you’re first getting started, you can day trade a single share if you want. You can also trade a significant number of shares if you think the market will have a good day or for any other reason.
There’s no limitation to how much you can trade. If you want, you can even day trade ETFs with a margin account. A margin account essentially means you can borrow money for your day trades in hopes of profiting more than you would if you only used your money.
However, you’re going to need to pay the money back regardless of whether or not you have a return on your investment.
Tips for Day Trading ETFs
When you day trade ETFs, you can do a few things to set yourself up for success. This section has some tips you should follow when you start trading:
- Avoid trading in the first 30 or so minutes that the market is open. The ETF prices can change rapidly and highly. Thus, it’s best to wait until the prices settle so you can see how the market is trending for the day before you begin trading.
- Don’t wait until the market closing time, and sell your ETFs before the last 30 minutes of the trading day. Similar to the beginning of the trading day, the market can be very volatile at this time, so you don’t want to risk a huge decrease right before selling your ETF.
- Make sure you’re educated on both day trading and ETFs before you begin trading. You don’t want to make a beginner’s mistake and lose all your money in one trading session. Indeed, you’ll benefit greatly from knowing how to make smart trading decisions so you can set yourself up for success.
Resources To Learn More About ETFs and Day Trading
If you want to be a successful trader, you need to spend time learning more about ETFs and day trading in general. The resources in this section will help you enhance your trading game, whether you’re a beginner or a seasoned trader.
Index Funds & ETFs
Index Funds & ETFs (available on Amazon.com) will teach you what ETFs are, how to make an ETF trading strategy, and why ETFs are a great investment, especially compared to other funds. There’s also information on trading index funds and how to pair them with ETFs in your trading portfolio.
How to Day Trade for a Living
How to Day Trade for a Living (also from Amazon.com) will help beginners get acquainted with day trading. You’ll learn how to make a day trading strategy, where to start trading, and read some examples of day trading strategies.
Tools and Tactics for the Master Day Trader
Once you get more familiar with day trading, be sure to check out Tools and Tactics for the Master Day Trader (also from Amazon.com). In this publication, you’ll read about:
- More advanced strategies
- Some real-life trades that the authors have made
- An analysis of each trade
This book is great to reference while you trade to answer some of the questions or dilemmas you may face.
Trading Strategy Videos
This video from Trading Strategy Guides on YouTube gives a quick overview of day trading ETFs, how it works, and what you need to know about doing it:
In this YouTube video, Ricky Gutierrez explains how to day trade ETFs as a beginner:
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
You can day trade ETFs successfully as long as you do it right. While some people hold ETFs as a long-term investment, there are benefits in choosing to day trading them. Some benefits include the abundant information and insights available for trading them profitably and the diversification that these instruments offer. Even when traded short-term, ETFs can give traders good returns.
Practice is the best way to become a successful trader, but you can also utilize the books and videos in this article. Furthermore, there are many recommended ETFs for day trading if you’re not sure where you should start.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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