Day Trading ETFs – The Ultimate Guide

Alexander Voigt

By Alexander Voigt

Last Updated: July 27, 2023

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You can day trade stocks and options, get into futures trading and day trade currencies. How is it about day trading ETFs? This article answers the question, can you day trade with ETFs and do day trading rules apply to intraday trading of exchange-traded funds? What are the top exchange-traded funds for day trading? In this article, I’ll explain the concept of day trading ETFs and reveal the best ETFs to day trade.

day trading etfs

About Day Trading ETFs

ETFs are financial assets used for multiple trading styles, such as day trading,swing trading and investing. Multiple assets are combined within an ETF, which is excellent for the diversification investors are looking for when investing. Day traders frequently use ETFs with high trading volumes to anticipate market movements on high momentum.

Best ETFs for Day Trading

As a day trader, you need three things – high momentum, high trading volume and low-bid-ask spreads to increase probabilities of excellent trade executions with low slippage.

  1. ProShares UltraPro Short QQQ (SQQQ)
  2. ProShares Ultra Pro QQQ (TQQQ)
  3. SPDR S&P 500 ETF Trust (SPY)
  4. Direxion Daily Semiconductor Bull 3x Shares (SOXL)
  5. Invesco QQQ Trust Series I (QQQ)
  6. Financial Select Sector SPDR Fund (XLF)
  7. Direxion Daily Semiconductor Bear 3x Shares (SOXS)
  8. ProShares Short QQQ (PSQ)
  9. iShares iBoxx $ High Yield Corporate Bond ETF (HYG)
  10. Direxion Daily S&P Biotech Bull 3x Shares (LABU)

All of those ETFs have a trading volume of over 30 million shares per day (average value over the past 3 months). Day trading those ETFs can be done with low price spreads (the difference between the bid price and the ask price in the order book).

How to Day Trade ETFs

Day trading ETFs is relatively equal to day trading stocks.

Ensure Your Broker Supports ETF Day Trading

As long as you use a retail brokerage firm, or day trading broker, chances are at 99.9% that your broker allows you to day trade ETFs.

However, day trading exchange traded funds is a bit different from investing in exchange traded funds because the pattern day trader rule prevents you from day trading ETFs if you try to execute more than 3 trades in a 5-day period with less than $25,000 in your account.

So, you are all good day trading ETFs if you don’t plan to trade that often, or if you have more than $25,000 in your account since then, you can trade as often as you want.

Identify the ETF You Want to Day Trade

Day trading ETFs does not require any fundamental analysis or detailed analysis of the ETF and its investments in particular stocks. Instead, you should ensure that you know what type of ETF you day trade and its typical intraday volatility.

The type of ETF is important because there are leveraged ETFs and normal ETFs. Normal ETFs move 1:1 as their assets. So if, for example, an ETF is invested 100% in the stock of Bank of America, and Bank of America moves up 1%, the ETF would do the same.

However, if you day trade leveraged ETFs, your ETF price will move on a higher pace. Leveraged Equity ETFs, for example, are the ProShares UltraPro QQQ (TQQQ) and the Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL).

Use Technical Analysis

Day traders use technical analysis by utilizing charting apps to identify the best possible entry points, reasonable stop loss levels and profit target zones. It requires a reasonable amount of screen time to get used to technical analysis, day trading patterns and candlestick patterns, whereas a paper trading account can help you to get used to the trading platform, learn how to place trades and where you can practice day trading ETFs at no risk.

Decide Whether to Use Limit or Market Orders

Before you transmit your order via your broker to the exchange, make sure to decide which order type you want to use. If you use a market order, your entire order with full size will most likely be filled within milliseconds if you place the trade during market hours. However, if you use a market order, the order gets executed for the best possible price currently available, which is typically a fill at the ask in the order book.

If the execution price if of a higher priority for you, use limit orders. They only get executed if the market hits or falls below your price limit when buying ETFs. The main risk of using limit orders is that they may never get executed if the market price never comes back to your limit price.

Use a Trading Journal to Document Trades

What does it help if you executed 20 trades at the end of the day and you don’t know anymore why you got into a trade, where in the chart the entry point was and what you learned from it? Right, it’s not that great for learning and making things better.

That’s why you should use a trading journal app, where you can import all trades at the end of the day, automatically see the trade entries and exits and where you have the capabilities to make notes directly. In addition, the trading journal can be used to analyze what type of strategy worked best (if you tag each trade with the strategy name), it shows you if you are better at taking long trades or short trades, and it shows you the ratio of gross to net profits, etc.

The Advantages of Intraday ETF Trading

The main advantage of day trading ETFs is that you are all-cash overnight without any risk aligned to your portfolio. So, your portfolio will not be affected even if the market undergoes immense volatility or if news causes a short-term market decline.

Another advantage of ETF trading intraday is that it can be done by using immense leverage, which increases the profit potential. Let’s say you have $25,000 in your margin account. This alone enables you to trade on a 1:4 leverage, so you can day trade with $100,000 instead of $25,000 just because of having the margin account. In addition, if you trade ETFs that come with a leverage factor (UltraPro, 3x Shares ETFs, etc.), you add a ratio of typically 3, which equals a controlled investment in the underlying ETF of $300,000 and all of this with $25,000 in the account. Of course, the loss potential also rises at the same pace.

Trading ETFs is affordable and a much cheaper solution compared to mutual funds. Most retail brokers also offer zero commissions for ETF trading, as they do for day trading stocks. A direct market access broker is not necessarily needed for ETF trading, but it can be beneficial too.

Day Trading Exchange Traded Funds ETFs Conclusion

Day trading ETFs carry a lot of potential and enable day traders to speculate on volatile price changes in the underlying exchange traded funds. The entry barrier is relatively low if you want to place a day trade here and there, but for more active day trading ETF activities, you need $25,000 in your account.

The combined leverage of margin accounts plus leveraged ETFs goes as high as 1:10, where you can control $100,000 of intraday investments with every $10,000 in the account. Still, while there is a high profit potential, there is also an increased loss potential. The trades will be executed at normal stock exchanges, typically during regular trading hours. Some of the best ETF trading strategies might suggest trading pre- or post-market, but you should be careful outside the RTH since you can only use limit orders there.

You can choose between various ETF types such as a gold ETF, a gold miners ETF, an index ETF or any other ETF you want to day trade. Yet, the best ETFs for day trading are those with high trading volume, low bid-ask spread and good momentum. Various ETF trading strategies equal stock market trading strategies. Throughout the trading day, an exchange traded fund will always be priced without halts, giving you a lot of time to apply your favorite strategy.

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About the Author

Alexander Voigt is the founder of He has over 20 years of experience analyzing and trading the financial markets and has been quoted on leading financial websites such as Business Insider, Investors, Capital and Forbes.