Lets start by answering a simpleton motion. What is day trading? Day Trading is the elementary act of buying stocks with the intention of selling them for a higher price ( short sell traders sell stocks with the intention of covering at a lower price to make a profit ) .
sadly, most beginning day traders will lose money. trade involves a high sum of risk and can cause founder traders to cursorily lose tens of thousands of dollars. however, the allure of day trade is the fact that skilled traders can make six figures working only 2-3 hours a day.
Most draw a bead on traders are seeking fiscal freedom & security, and independence. In order to be a successful trader you must adopt a trading scheme. My favored is called Momentum Trading Strategy. That ’ s what I ’ megabyte sharing with you here nowadays .
Momentum Day Trading Strategy
momentum is what sidereal day trade is all about. One of the first things I learned as a novice trader is that the only way to profit is by finding stocks that are moving. The good news is that about every unmarried day there is a stock that will move 20-30 % or even more ! This is a fact .
The motion is how do we find those stocks before they make the boastfully move. The biggest realization I made that has led to my success is that the stocks that make the 20-30 % moves all share a few technical indicators in coarse .
Before going any farther, let ’ s step binding for a moment and ask ourselves what we require from a momentum day deal strategy. First of all, we need a stock that is moving. Stocks that are chopping around sideways are useless .
So the first gradation for a trader is to find the stocks that are moving. I use stock scanners to find these. I ONLY trade stocks at extreme point. This means I look for a standard having a once in a year type of event. The price military action associated with this consequence is about constantly the clean .
Day Trading Strategies & The Anatomy of Momentum Stocks
momentum stocks all have a few things in park. If we scan 5000 stocks asking for only the following criteria to be true, we ’ ll much have a list of less than 10 stocks each day. These are the stocks that have the electric potential to move 20-30 %. These are the stocks I trade to make a populate as a trader .
Criteria #1: Float of under 100mil shares
Criteria #2: solid casual Charts ( above the Moving Averages and with no nearby resistor ) .
Criteria #3: high relative volume of at least 2x above average. ( This compares the current volume for nowadays to the average volume for this time of day. These all refer to the standard volume numbers, which are reset every night at midnight. )
Criteria #4 : A fundamental catalyst such as a PR, Earnings, FDA Announcement, Activist Investors or some early kind of breaking news. Stocks can besides experience momentum without a fundamental catalyst. When this happens, it ’ second called a technical break .
Finding Stocks For My Day Trading Strategies
Stocks Scanners allow me to scan the entire market for the types of stocks displaying my criteria for having momentum .
These scanners are the most valuable tools for a day trader, and I had my exploitation team build them right into our Chat Room software. Once the scanners give me an alert, I then review the candlestick chart and try to get an submission on the first pull back .
Most traders will buy in this lapp blot, those buyers create a spike in volume and solution in a quick price variety as the stock moves up. Your job as a founder trader is to learn to find the submission in real-time .
I have created 3 sets of stock scanners for 3 different types of scanning. I have my Momentum Day Trading Strategies scanners, my reversion trade Strategies Scanners, and my Pre-Market Gapper Scanners .
These 3 scanners give me tons of trade alerts everyday. rather of having to manually flip through charts, I can instantaneously see stocks that are in act. Stock scanners are what every trader nowadays should be using to find hot stocks, whether it ’ s penny stocks, belittled caps, or boastfully caps .
My Favorite Momentum Day Trading Chart Patterns
Bull Flags are my absolute favored chart model, in fact I like them so much I made an integral page dedicated to the Bull Flag Pattern. This practice is something we see about every single day in the commercialize, and it offers depleted risk entries in hard stocks .
The hard partially for many founder traders is finding these patterns in real-time. These stocks are easy to find using the proprietary neckcloth scanners I have developed and use casual in our old world chat rooms .
My Surging Up scanners immediately shows me where the highest relative volume in the marketplace is. I plainly review scanners alerts to identify the strong stocks at any given time of the day .
As a form based trader, I look for patterns that support continued momentum. Scanners alone can not find patterns on charts. This is where the trader must use their skill to justify each trade.
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Momentum Day Trading Strategies Pattern #1: Bull Flags
With the Bull Flag Pattern, my entrance is the inaugural candle to make a new high after the break. So we can scan for the stocks squeezing up, forming the tall k candles of the Bull Flag, then wait for 2-3 crimson candles to form a pullback .
The first park candle to make a fresh high after the pullback is my entry, with my stop at the abject of the pullback. typically we ’ ll see volume spike at the consequence the first candle makes a new high. That is the tens of thousands of retail traders taking positions and sending their buy orders .
Momentum Day Trading Strategies Pattern #2: Flat Top Breakout
The flat top break radiation pattern is like to the bull flag traffic pattern except the pullback typically has, as the name implies, a flat clear where there is a strong grade of resistor. This normally happens over a menstruation of a few candles and will be easy to recognize on a graph by the obvious flat top pattern .
This radiation pattern normally forms because there is a boastfully seller or sellers at a specific price horizontal surface which will require buyers to buy up all the shares before prices can continuing higher. This type of practice can result in a explosive break because when abruptly sellers notice this resistance level forming they will put a arrest orderliness barely above it .
When buyers take the resistance flat out, all the buy check orders will then be triggered causing the store to shoot up very promptly and the longs will be sitting on some nice profits when it does !
Real Life Momentum Day Trading Strategy Examples
Above is an model of a taurus iris break. You can see we had a courteous opening drive on gamey proportional volume followed up by a consolidation period on low volume that finally broke out again. These patterns happen everyday then knowing how to trade them is key to making money !
This is another bull flag model that worked out absolutely and as you can see it had the lapp characteristics as the other bull flag practice above. We had a dainty open drive with properly volume followed by a low book pullback before a big jump on the break.
Risk Management 101: Where to Set My Stop
When I buy momentum stocks I normally set a tight stop decree just below the first wrench back. If the stop is far than 20 cents away, I may decide to stop out minus 20 cents and come binding for a second try. The reason I use a 20 penny stop is because I constantly want to trade with a 2:1 profit loss ratio. In early words, if I risk 20 cents, it ’ south because I have the potential to make 40 cents .
If I risk 50 cents or more, it means I need to make 1.00 or more to get the proper profit loss proportion to justify the trade. I try to avoid trades where I have to generate a large profit to justify the trade. It ’ second much easier to achieve success if I have a 20 cent stop consonant and 40 penny aim vs a 1.00 stop and a 2.00 profit target .
When I ’ thousand trading I try to balance my hazard across all trades. The best manner to calculate risk is to look at the distance from my introduction price to my arrest. If I have a 20 cent stop and want to keep my soap risk to $ 500 I ’ ll take 2500 shares ( 2500 x .20 = 500 )
The Best Time of Day to Trade
The Momentum deal Strategies can be used from 9:30-4pm but I find the mornings are about always the best time to trade, specifically the first base hour the market is open. I focus my trade from 9:30am – 11:30am. however, at any clock time during the day we can get a newsworthiness spike that will suddenly bring a fantastic sum of volume into a stock .
This sprout which was of no pastime sooner in the day is now a good campaigner to trade on the first gear attract back. The first pull back will typically take the class of a taurus flag. After 11:30am I prefer to alone trade off the 5-min chart. The 1-min chart becomes excessively choppy in the mid-day and good afternoon trade hours.
Entry Checklist Summary
Entry Criteria #1: Momentum Day Trading Chart Pattern ( Bull Flag or Flat Top Breakout )
Entry Criteria #2: You have a close stop that supports a 2:1 profit loss ratio
Entry Criteria #3: You have eminent proportional volume ( 2x or higher ) and ideally associated with a catalyst. Heavier volume means more people are watching .
Entry Criteria #4: low Float is preferred. I look for under 100mil shares, but under 20million shares is ideal. You can find the outstanding float with Trade Ideas or eSignal .
Exit Indicator #1: I will sell 1/2 when I hit my first profit target. If I ’ megabyte risking $ 100 to make $ 200, once I ’ m up $ 200 I ’ ll sell 1/2. I then adjust my arrest to my introduction price on the balance of my place
Exit Indicator #2: If I haven ’ t already sold 1/2, the first candle to close red is an die indicator. If I ’ ve already sold 1/2, I ’ ll reserve through loss candles angstrom long as my breakeven catch doesn ’ metric ton stumble .
Exit Indicator #3: Extension bar forces me to begin locking in my profits before the inevitable transposition begins. An extension banish is a candle that spikes up and immediately put me up $ 2-400 or tied more. When I ’ megabyte golden enough to have a stock spike up while I ’ megabyte hold, I sell into the transfix .
Analyze Your Trading Results
All successful traders will have positive trade metrics. trade is a career of statistics. You either have statistics that generate returns or losses. When I work with students I review their profit personnel casualty ratios ( average winners five average losers ), and their share of success .
This will tell me if they have the potential to be profitable, without even looking at their total P/L. once you finish each week you have to analyze your results to understand your current trade metrics .
The best traders keep meticulous deal records because they know they ’ ll be able to data mine these records in ordering to understand what they should to to improve their trade. I use Tradervue to monitor my trade stats which has been a huge assistant in fine tuning my strategies .
Want to Keep Learning? I Teach ALL my Momentum Day Trading Strategies in our Day Trade Courses
In our Day Trading & Swing trading Courses you will learn all the details of this deal strategy. In our Day Trading Chat Room, you be able to hear me while I ’ m trade. When I see a stock that has highly high bulk I look to get in on the first or moment pull back. pull backs should take the shape of a Breakout Chart Pattern such as Bull Flags or Flat Tops.
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I am an extremely active agent trader in the foremost 2 hours of the marketplace and then I slow way down. I normally don ’ triiodothyronine trade in the afternoons. Stocks on the Surging up Scanners that are candidates for the Momentum Trading Strategy can be traded vitamin a early as 9:31 .
sometimes a breed that wasn ’ triiodothyronine gapping up and already on my radar for a Gap and Go ! Strategy barter will surge with book out of the gates and come into play for a Momentum Trade. These stocks may have news or may be experiencing a technical foul break or be a sympathy shimmer to another strong lineage or sector .