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What is the Importance of SPDRs for a Day Trader?

Standard & Poor's Depositary Receipts, also known as Spiders or SPDRs are exchange traded funds (ETFs) based on the S&P 500 Index. Shares represent ownership in the SPDR investment trust that tracks S&P 500 Index.

SPDRs were introduced in 1993 by State Street Global Advisors that have become one of the most popular ETFs worldwide in respect of assets under management.

Nowadays, there is a wide array of SPDRs available to investors. Some of these Spiders track stocks on the basis of market value, while others concentrate on different market sectors.

SPDRs are traded on stock exchanges similarly to other ETF's and stocks. Their price movements intraday based on the performance of the particular indices or asset they track.

Other than SPDR S&P 500 ETF there are 140 SPDR ETFs that track different stock indexes, such as the well-known Dow Jones Industrial Average, Nasdaq Composite and Russell 2000. Spiders may also track a specific sector index, as US Technology Index, US Real Estate Index or US Health Care Index.

Did you know?

SPY ETF and SPDR ETF are often considered equal but the SPDR S&P 500 ETF Trust (SPY) is just one of the heaps of SPDR ETFs available on the stock market.

If you want to trade Spiders ETFs, you can buy and sell SPDRs through your online brokerage account, and they can be held in a variety of investment accounts, like individual retirement accounts (IRAs) and 401(K) plans.

Why are Spiders important for investors and Day Traders who don't trade SPDR ETFs?

Investors with mid- or long-term time horizon can exploit SPDRs' price movements to determine their portfolio's diversification based upon the performance of the sectors in which the stock they already hold or want to buy is listed. Spiders provide traders with a reliable snapshot about market - or sector performance throughout the day, hence their sensitivity caused by Spiders' extremely high liquidity.

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As a rule of thumb liquid stocks typically have high trading volume that allows for larger quantities to be bought and sold without majorly affecting the stock price. SPDRs in general are very liquid including SPY which is the most liquid ETF on today's US Stock Market. Since most of the Day Trading strategies largely rely on speed and accurate trade timing, large volume is commonly tantamount to trades executed with ease. By keeping track of Spiders intraday, many Day Traders feel themselves navigated as SPDRs serve as an unequivocally efficient gauge for market- or sector trends and their performance.

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Day Traders are craving for significant price movements to realize profit from multiple trades within one trading day. SPDRs' rapid price movements can help them identify recent market conditions and trend turns, regardless of what type of Intraday Trading strategy they are engaged with. Spiders to be tracked are useful for the most common Day Trading techniques, like breakout trading, momentum trading or swing trading because high-frequency price changes of Spiders help them anticipate coming price movements in the stock they have position or the one they want to buy.

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