Intraday Trading: A Quick Guide

One of the distinct advantages exchange traded funds (ETFs) have over their mutual fund counterparts is intraday trading. What exactly is intraday trading, and why is it an advantage for ETFs over mutual funds?

Think about returning something to the store — you likely have the option to do so during store hours. That’s roughly what intraday trading is: the ability to buy and sell an asset within the same trading session.

When you buy and then sell an asset quickly, it’s likely to extract profits in the short term. Take the same store analogy. Say you buy something at one store and then sell the item to another store for a price higher than what you paid for it — this is what day traders attempt to do during intraday trading with assets like stocks, bonds, and ETFs.

Day traders do this quick-hit buying and selling often in order to take advantage of short-term opportunities in the market. Good traders can do so at a profit regardless of whether the market is trending upwards or downwards.

ETFs Offer Intraday Trading

As mentioned, that ability to buy and sell ETFs throughout the trading session offers them a distinct advantage over mutual funds, which trade once per day at the close of the market (4:00 PM, Eastern). Just like individual stocks, ETF shares can be bought and sold throughout a trading session, but their structure is similar to mutual funds.

This gives the trader the option to buy and sell ETFs, which hold a basket of stocks or other assets, instead of individual assets. If a trader is bullish on the tech sector, they can opt to buy and sell individual stocks representative of the broad tech sector like Microsoft, Apple, or other similar stocks.

With an ETF, a trader can play that whole sector via broad tech ETFs like the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). They can trade a variety of ETFs in various sectors such as healthcare, real estate, and financials — the vast ETF universe even offers sub-sectors like robotics or artificial intelligence, so needless to say, if a trader is feeling bullish on something, there’s probably an ETF for it.

The same goes for alternative assets like gold or other commodities. The opportunities are plenty, and with intraday trading, ETFs give traders another dynamic option to profit in the markets.

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