Day Trading S&P 500
The S&P 500 is an American stock market index, which is based on the market capitalizations of 500 large companies with common stock on a few major American stock exchanges. Using the performance of these 500 companies as a benchmark, the S&P 500 allows traders to critically analyze a wide range of market data, and test their market strategies with big stocks and large trading volume. Day trading S&P 500 companies is a good way to limit your trades to big stocks with high volume.
High trading volume means the amount of shares traded over a given period for a stock is high. Stocks with high trading volume have more liquidity, which in turn allows day traders to enter and exit trades faster and easier. Finding a good balance with trade price and volume facilitates better trading opportunities for day traders.
When day trading S&P 500 stocks, you will be trading big-name companies that will give you the sort of trading volumes and price volatility that you want to try and profit from as a day trader. Trading with smaller securities like penny stocks simply doesn’t demonstrate the necessary skills and psychology that go into a successful day trading session. If you want to properly learn how to day trade with potential for big profits, then day trading S&P 500 is the way to go.
start demo challenge
start 14 day trail
Fill in your details to apply for the challenge!
Why It Is Important To Learn Day Trading S&P 500
Some hopeful day traders move towards things like penny stocks to try and learn day trading techniques and strategies. While the actual prices for penny stocks are very low, they are considered to be realtively high-risk, due to a number of factors. To be specific, penny stocks tend t trade with low volume, and no liquidity, so it can be hard to learn the practical trading strategies that benefit day traders.
Playing with penny stocks can also be risky, since they are traded mostly through over-the-counter trading services. These are different from major exchanges like the NYSE or NASDAQ, in that they are smaller-scale, and are often poorly regulated. It is easier to fall victim to scams with penny stocks than it is day trading with S&P 500.
Like we’ve said before, day trading with the S&P 500 gives you an excellent healthy benchmark to begin learning day trading. Even if you’re an experienced day trader, it can be a good idea to stick with S&P 500 companies, since the index gives you a lot of pertinent data, and the stocks trade at high volumes with plenty of liquidity. There is also more information available, usually, for big name companies, which gives us more insight into the value of their stock as traders.
Why It Is Not Good For Traders To Do ETFs Or Similar Financial Assets
ETFs, or Exchange Traded Funds, are marketable securities based on some kind of underlying asset, such as a stock index, a bond, or a basket of assets. They act similarly to mutual funds, except they are traded on common exchnages during market hours. This allows investors to have the diversity of a mutual fund, but in a commonly traded format with higher liquidity.
For this reason, it can be tempting for day traders to move towards ETFs, or similar financial assets when they begin day trading. Although some ETFs can trade with the sort of volume and liquidity that is good for day trading, these variables are dependent on a wide range of factors that make the analysis behind day trading more difficult.
Lower levels of liquidity compared to day trading S&P 500 stocks can lead to greater bid-ask spreads, larger discrepancies between net asset value and the value of the securities underlying the ETF, and a decreased possibility for profitable trade. If you want to learn the most effective strategies and techniques for effective day trading, day trading with the S&P 500 is a much better alternative.
Did you like this article? Join our live day trading chat room for free to watch Meir Barak trading live every day, ask questions and share your knowledge. Become part of the TradeNET community today!