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2. Momentum

The Best Time of Day to Trade

The Momentum Trading Strategies can be used from 9:30-4pm but I find the mornings are almost always the best time to trade, specifically the first hour the market is open.  I focus my trading from 9:30am – 11:30am.  However, at any time during the day we can get a news spike that will suddenly bring a tremendous amount of volume into a stock.

This stock which was of no interest earlier in the day is now a good candidate to trade on the first pull back.  The first pull back will typically take the form of a bull flag.  After 11:30am I prefer to only trade off the 5-min chart.  The 1-min chart becomes too choppy in the mid-day and afternoon trading hours.

Entry Checklist Summary

Entry Criteria #1: Momentum Day Trading Chart Pattern (Bull Flag or Flat Top Breakout)

Entry Criteria #2: You have a tight stop that supports a 2:1 profit loss ratio

Entry Criteria #3: You have high relative 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 Indicators

Exit Indicator #1: I will sell 1/2 when I hit my first profit target.  If I’m risking $100 to make $200, once I’m up $200 I’ll sell 1/2.  I then adjust my stop to my entry price on the balance of my position

Exit Indicator #2: If I haven’t already sold 1/2, the first candle to close red is an exit indicator.  If I’ve already sold 1/2, I’ll hold through red candles as long as my breakeven stop doesn’t hit.

Exit Indicator #3: Extension bar forces me to begin locking in my profits before the inevitable reversal begins.  An extension bar is a candle that spikes up and instantly put me up $2-400 or even more.  When I’m lucky enough to have a stock spike up while I’m holding, I sell into the spike.

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