Day Trading ETF’s

Looking for the process of day trading ETF’s? Due to the volatile nature of exchange-traded funds (ETFs), they are the perfect candidate for day trading. When combined with the right strategy, day trading ETFs can be one of the best and safest ways to generate profits in the market consistently. 

Are ETFs Good for Day Trading?

Besides stocks, ETFs are very popular when day trading. They offer a lot of diversification compared to mutual funds, they are high liquidity when trading and also have low costs. They are definitely a good strategy to employ for trading or investing.

Make sure to take our free online trading courses to you know how to successful day trade ETFs. 

What The Heck Is An ETF Anyway?

Day Trading ETFs

To make a long story short, exchange traded funds are a basket of securities that trade on an exchange. A money management firm buys a group of assets – like stocks or bonds – and then lists the group or “basket” on the market to trade. 

Typically, the purchased assets are designed to mimic the performance of an index such as the S&P 500.  

Where ETFs shine is in their availability, you can get them for every major asset class. For example, equities, stocks, bonds, commodities, and cash can all comprise ETF’s. A real like example is the SPDR S&P 500 ETF ($SPY), which tracks the S&P 500 Index. 

The Two Components of an ETF

Even though an ETF looks a little bit like an index mutual fund, fundamentally, it is quite different. At their core, ETFs have two types of shares: Creation units and retail shares.

Creation units. Authorized participants such as trading and brokerage firms hold creation units and agree to commit cash to the fund. These “authorized participants” or creation unit holders can exchange their shares for the actual securities held in the fund. Alternatively, they can add the appropriate securities to the fund to make new creation units. The purpose of this is to keep the value of the ETF in line with the underlying market index. 

If you’re curious, this is how they do it. When the price of an ETF drops below the value of the different securities in it, the “authorized participants” will trade in their creation units for the securities. Second, they then sell the securities in the open market.

 Alternatively, if the price of the ETF goes above the value of the securities in it, the “authorized participants” will buy up more securities. Next, they exchange them for more creation units to sell at a profit.

Retail shares. Provided that only authorized participants can trade creation units, retail shares are what’s left for us. Retail ETF shares are listed on the Exchange to be bought and sold by regular traders/investors like you and I. Hence if you are day trading ETFs, you’ll be trading the retail shares.

More often than not, the price of both the creation units and the retail shares will correspond with the cost of the securities. On occasion, though, we see the value of the ETF and its investments going in different directions.

Can I Buy and Sell ETF on Same Day Intraday?

You can day buy and sell an ETF the same day. It would be considered a day trade or intraday trade. If you’ve ever traded an individual stock, then buying and selling an ETF will feel familiar because it’s traded the same way. Once again, you’ll need a trading platform and a brokerage firm to trade them. And in case you didn’t know, ETFs trade on both the NYSE and NASDAQ.

The Advantages of Day Trading ETFs

Flexibility. ETFs have a leg up over the competition in that you can buy or sell them any time you want during the trading day, long or short, using cash or margin, all through your regular brokerage account. Needless to say, this flexibility is great for day traders.

Versatility. What I especially like about ETF is that they offer a fantastic way for day traders to get exposure to market segments that may otherwise be difficult to trade. Not only are ETFs are versatile financial instruments, but they are also suitable for every trading style – day or swing trading. 

Selection. Given the fact that ETFs are available on the big market indexes, not to mention domestic bond indexes, international stock indexes, foreign currencies, and commodities, your options are unlimited. 

Customized. Sometimes traders are interested in a market segment that doesn’t have an index on it. What ends up happening is that some companies go ahead and develop their own niche indexes. And in turn, issue ETFs on them. That’s why you can find ETFs for such markets as green energy and Islamic investing.

Affordable. What I like about ETFs is that they provide you with a cheaper alternative to get exposure to a sector you might otherwise not have access to. Say, for example, that I want to invest in gold. Luckily, I have many options. Buying gold bullion bars, a gold coin or even trade in gold futures contracts. But I don’t have the money. Sigh. What am I to do? Well, the cheapest option for me is to buy shares of $GLD. $GLD is a gold ETF that follows the market price of gold. What’s nice about $GLD is that it costs me a fraction of the amount of buying bars.

More Bang for Your Buck With ETFs

If you think the entire stock market will go up, you can buy a stock index like Dow Jones. For those of you unfamiliar with the Dow Jones Index, 30 companies make it up. You have three options available.

First, you can either buy all 30 companies that make up the Index. Second, you can buy DJIA futures contracts which can be really, really expensive. Third, you can buy shares of an ETF that follows Dow Jones, like the DIA ETF, at a fraction of the price. 

A Smart Move

Day trading is among one of the best ETF trading strategies due to the high volatility environment. And this can provide you with very lucrative short-term opportunities.

High volatility means you can easily buy and sell ETFs any time throughout the trading day. For those of you who’ve traded individual stocks, likely found themselves stuck in a situation where you can’t unload shares due to low volatility.

Fortunately, with the right ETF, you won’t be in this situation. If you want to discuss ETFs with a community, check out our trade room. 

How to Day Trade ETFs

  • Here’s how to day trade ETFs:
  • Open an account with a major broker like TD Ameritrade or ETrade.
  • Fund your account. Either personal or IRA.
  • You can trade either short term or long term.
  • Make sure to learn support and resistance.
  • Some popular ETFs: SPDR S&P 500 (SPY).
  • Gold Miners ETF (GDX).
  • ProShares VIX Short-Term Futures ETF.
  • ProShares Ultra VIX Short-Term Futures ETF (UVXY).
  • iShares MSCI Emerging Markets ETF (EEM).

These are some of the most popular day trading ETFs available for stock trading. Just like you’d use technical analysis, fundamental analysis, or whatever you use to trade stocks, you’d use to trade ETFs.

Tips on Day Trading ETFs

Trade The SPY ETF. The most trusted ETF is the SPY ETF. It ranks for the largest AUM, has the most substantial trading volume and tracks the performance of the most popular stock index in the world, the S&P 500.

Only Enter Trades After 10:00 AM EST. Even though some traders like to catch a run out of the gates, I like to let the dust settle. It’s vital to wait and see what the smart money is doing, don’t get caught in a false breakout. 

Use Limit Orders Not Market Orders

If you place a market order, you are telling your broker to immediately buy or sell the stock for you at any price. Yes, at any price.

Aside from being hasty, if you place a market order, you have no control over the fill price. You get filled on the wrong side of the bid-ask spread. Essentially, a market order buys at the ask (high side) and sells at the bid (low side). 

Unlike a market order, a limit order only fills at the price you want, or better. The keyword here is limit; a limit order limits the price you are willing to pay for the stock.

You tell your broker to buy or sell a specific stock at or better than a set price specified by you. The important thing is: You are in control. 

Read our post on limit order vs market order.

What Is the Best ETF to Day Trade?

  • $QQQ – Extremely popular tech ETF. As we all know tech leads bull markets higher.
  • $SPY – Good ol’ faithful SPY is always extremely liquid and has no issues with order fills.
  • $VXX – This ETF is inverse tech. I trade it long when tech goes down and as a hedge.
  • $SLV – Silver ETF when silver is in a bull market. Very popular.
  • XLF – Top financial ETF full of all the top banks. Good to day trade long or short.


There is no doubt there is money to be made day trading ETF’s, but you need to know how to do it right. Day trading ETFs provide simple trading opportunities with a lower operating cost than most of the other financial vehicles out there.

Luckily, at Bullish Bears, our focus is on technical analysis and how to apply it to trade successfully. So if you want to know how to use technical analysis to get a piece of the ETF pie, join us today. Thank you and happy trading!

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