Every trader should have these rules printed out in front of them while they trade so they won’t be broken. Here are 13 rules all traders should follow for trading momentum stocks:

1.Pre-Plan Your Entry and Exit Strategy

Before you put on a trade, you should always know all of the following:

You cannot take a trade if you do not know these things. Don’t wing it and figure out things on the fly. Pre-define everything.

2.Define and Manage Your Risk

Trading momentum stocks can be risky because momentum stocks move fast and are volatile. Before every trade, you should know how much money you are risking on the trade. $100? $200? You cannot play poker without knowing how much you are going to risk. You would never go all in with a 2,6 hand. The same is true for trading. Defining and managing your risk appropriately is critical.

3. Buy on Dips, Sell into Strength

Most new momentum traders sell on dips and buy on strength. It is our nature to want to be a part in a stock when it is going up, and get out when it is going down. To be a successful trader, you have to do the opposite of what your instincts tell you to do when you are in a trade. You have to take profits when things are looking great and everyone else is chasing, and buy when everyone else is panicking out.

4. Identify Key Support and Resistance Areas Before Trading

Knowing key price levels where the stock might reverse is essential for trading momentum stocks correctly. Knowing where the key support and resistance areas are, on the intraday and daily charts, before you enter a trade will allow you to enter and exit and the correct prices, increasing the probability the trade will play out in your favor.

5.NEVER Chase

Volatility can be your best friend or your worst enemy. It can really burn you if you are a chaser. If you buy too high or sell too low, there is a high probability the stock will reverse on you right after you enter. Always wait for a pullback, or wait for a better setup on a different stock. There will always be another opportunity in the markets. If you have issues chasing stocks and dealing with FOMO, learn how to conquer the habit in this article here.

6. Never Add to Losers

Traders add to losing positions with the idea that they will have a bigger winner once the stock reverses the trend. This is rarely the case because the reason traders are in a losing trade is because they are on the wrong side of the trend. Adding to losers is fighting the trend, and most of the time will just make your losing trade even bigger.

7. Use Margin Wisely

Margin can be the momentum trader’s best friend or worst enemy. It has the potential to make your winners a lot bigger, but also can increase the size of your losers. If you get stubborn on margin when trading momentum stocks, you will risk blowing up your account in a very period of time or even going into debt to your broker. For tips on how to use margin correctly, check out this article here.

8. Avoid Illiquid Stocks

Illiquid stocks suck for momentum trading, They have huge spreads, rarely follow-through, and are choppy. You should avoid trading stocks with less than an average of 1 million shares of trading volume unless there is a catalyst that is bringing in high relative volume into the name. Illiquid means that no one is watching it. And if no one is watching it, there aren’t enough buyers or sellers to make the stock make a big move.

9. Trade Proven Patterns

It easy to treat trading stocks like gambling. You can buy a random stock at a random time and make money, and feel like it’s easy. The reality is that you just got lucky, and the only way you can consistently extract income is by trading a strategy and patterns with an edge. Make sure all the strategies and patterns you trade can consistently generate income for you. Just because you make money once doesn’t mean you can do it consistently.

10. Trade Stocks With Momentum History

Stocks tend to have self-fulfilling prophecies. If they made a big move in the past, it is likely to do so again if it sets up correctly. Look at stock’s daily chart to see if it has a large range daily candles in the past where high relative volume comes in. If this is the case, it will likely happen again if it gaps up or down with a catalyst.

11.Focus on the Daily Chart Trend

The big picture trend of a stock is seen on its daily chart. This should be the primary influence on your bias on a stock. Is the daily uptrending? Downtrending? Going sideways? Day traders will often make the mistake of making a trade counter-trend to the daily chart. Intraday setups have a low probability of working if they are not aligned with the stock’s daily chart trend.

12. Know the Stock’s Catalyst

Momentum stocks will often gap up and gap down in response to company news. You should always know what is causing a stock to move before you trade it. Some catalysts are not conducive to bringing momentum into stocks. Here is a list of the best catalysts for bringing momentum into stocks so you will know which to trade, and what to avoid.

13. Trade Without Emotion

Fear and greed are the two primary emotions that result in the majority of your trading mistakes. Eliminating them is easier said than done. Much of your emotion will stem from making and losing money.  An easy way to reduce emotion in your trading is to reduce your position sizes, as you will focus less on the money you are making or losing and more on signals of the market.

Sign Up For This Weekend’s Live Summer Trading Webinar

Click Here to Register For the Live Webinar

The post Trading Momentum Stocks: 13 Essential Rules to Follow appeared first on Bulls on Wall Street.

A lot of trading educators just focus on their one or two most successful students. You always hear about the millionaire students, the lambos, and the 5 star hotels in marketing of most trading services. Most millionaire students you hear about from other trading services (assuming they are real) are the outliers, not the norm.

They do not reflect the typical experience of the aspiring trader who turns to the internet for their stock trading education. For every 10,000 people you see go through these services, very few make it to the millionaire level.

But rarely do services talk about the average student, who doesn’t have much capital, didn’t come from a wealthy background, had nothing handed to them, and did not see overnight success. Not to say that people that have had success have any of these things. Everyone comes from their own unique situation. At BOWS we like to focus on the average student, because they have a much more relatable experience to the typical aspiring trader. We like to focus on successful, consistent students, who are quietly building their account, making $100-$500 a day.

A year ago we did a post about Henrik from Finland, one of our most promising bootcamp and mentorship students (check out the post here). We wanted to see where he is today, and how his trading has evolved over the last year. Here is a recent interview we did with Henrik, updating us on his progress:

Interview with Henrik 9/23

1. What have been your biggest ups and down since taking the bootcamp?

Taking big losses after a good week and losing all my gains on Friday. The feeling that I finally got this and then the market slaps me in my face and I take a big loss. I remember quitting so many times. Biggest ups since taking the bootcamp was when I made 1500$ in one week, it was very good feeling.

2. How has your progress been the past year?

I used to go big in a position and then risk too much on my first trade and if i lost big it is hard to come back and make the rest of the day green. Now I take smaller size at first and focus on just 1-2 favorite stocks and watch them very carefully and if I lose, it won’t affect me that much and I can still come back with a green day.

3. What has been the biggest factors in finding consistency in your trading?

The biggest factor has been trading less. I used to trade 5-7 tickers for a day and that is way too much. Now my focus is on 1-3 tickers/day. It was hard to at first keep this phase a year ago, I just wanted to make more money but then I gave all gains back and even would go red for the day. That is even more frustrating when you had good day and you messed it up. Now these last couple of months I have able to keep it lower risk. Become more consistent in my trading and the whole mindset in general towards the money. Now I have a bigger reason and vision where I want to go and what I want to do. I am not attached to the outcome anymore, I give my best everyday.

4. What do you focus on for your strategy?

My focus is on Earnings plays and Momentum stocks. I trade flags, bear flags, Red to green moves, and Opening Range Breakouts/Breakdowns, I keep it very simple. I also trade what works in different market conditions and I might change my strategy on a weekly basis. I keep a journal and track the process.

5. How has the education from Bulls on Wall Street affected your trading?

The whole Team is very helpful and I am grateful for all the support when I had the bad times. I e-mailed, called Kunal or any of the Team members and they are glad to help and guide me.

6. What advice would you give anyone just starting out?

Start with the simulator at first and experiment who are you as a person and find the setups you like. Start trading small, just a few hundred shares at a time and don’t over trade as I have done. You only need one good trade to make your day good that is the truth. Keep the end goal all the time in your mind, why you want to trade, what you want to create and share. I think its good to have a bigger reason in your mind than just money.

7. Any last thoughts?

I have to say that you have to develop the right mindset and it comes with doing the right things every single day, meaning building the right habits, routines etc. It’s all about the process. Nothing big happens overnight, it takes time and dedication, you have to enjoy the ride for it’s bad times and good times. Face your fears every day it helps you pull the trigger.

Focus On Your Own Journey

Social media is great at making you feel like you haven’t done much with your life. Everyone’s a winner on Twitter, Instagram, ect. When it comes to trading, most of the people on Twitter showing big PNL’s are usually paper trading (not trading real money, there are a few exceptions). Regardless of whether they are real or not, you should only focus on your journey anyway, and figure what YOU need to do to find trading success.

99.9% of aspiring traders will not find overnight success. Many of the most successful traders you hear about today took months and years to get where they are today. It took me 5 hard years to really get this game down. But you could be trading for the rest of your life. So what is taking a couple years to grind and learn how to develop a skill that will give you freedom and wealth for the rest of your life? It’s part of your story.

Join Our Next Bootcamp

Start your journey with us today. Join our 60-Day Trading Bootcamp and get started in a complete trading program. To get started, get your free trading assessment here.

The post Finding Trading Consistency: Update On Henrik appeared first on Bulls on Wall Street.

Momentum trading is the best style of trading to make high percentage gains in your trading account in a short period of time. It is not a style for the risk adverse. You can make huge amounts of money in a short period of time, but you also can lose a lot in the same time frame. You must have the right strategies suited to your personality, so that you can execute correctly. Successful momentum traders know their strengths and weaknesses, and tailor their strategy based on both.

Momentum traders like us know what times of the day to trade and what types of stocks to trade that will give us big moves in a short period of time. Let’s start by talking about the trading day, and the three different phases:

Breaking Down The Trading Day

The stock market opens at 9:30AM EST and closes at 4PM EST, Monday-Friday. There are three different phases of the market day: The open, mid-day, and the close. Each time of day requires a different set of patterns and risk management strategies.

The market open is the period from 9:30-10:30. This is a period of price discovery, and it is the wild west of the trading day. This time of the day has the most volatility and volume in stocks.

The middle of the trading day is from about 10:30-2PM. This part of the trading day is characterized by consolidation and lower volatility. Volume dies down and stocks tend to be a lot more choppy this time of the trading day.

The close is the period from 2-4PM. During this part of the trading day more volume comes back into stocks, and you will often see some volatility come into stocks as we approach the market close. Many traders tend to enter and exit positions near the market close.

Trading the Open Is My Focus

Momentum traders like us focus on trading the market open. The market open has the most volume and range, meaning there is the best follow through on all your patterns. We mentioned earlier that momentum traders look to capture big moves in stocks in a short period of time. The open is the best time to capture these kinds of moves, because there is the most volatility and range in stocks during this time.

I rarely put on new trading positions after 10:30, as it just gets choppy and the best momentum trading patterns tend to have a lower probability of working. It is crucial that you prepare before the market open, so you know what stocks you are trading, and where you are going to enter and exit. Things happen to fast at the market open for you to figure it out on the go. You should have everything planned out. Now that you understand the different parts of the trading day, let’s talk about the types of stocks we like to trade.  

Focus on Stocks With Momentum

As momentum traders, we are looking to trade stocks with volatility. Most people associate volatility as a negative thing. However volatility for day traders and swing traders is what we want. Volatility is what allows us to use our capital most efficiently, so that it is always generating us income in the right stock. You must be able to manage your risk to trade momentum stocks, otherwise you risk losing a lot of money.   

A lot of people also associate volatility in the stock market with penny stocks. You can trade the volatility in penny stocks, but we find that they tend to be less predictable than mid and large cap stocks. What you need to understand is that the price a share of a stock costs does not matter. It’s how much range the stock has that matters for us momentum traders.

There is no difference between a $5 stock going to $5.50 and a $50 stock going to $55. It is the same percentage move. Put $5000 in either stock, you are going to end up making $500 in either scenario. Every day there are a few mid and large cap companies that are capable of making big moves in a short period of time. It is your job to find them before they make a big move. 

You also have to know the characteristics of the best momentum stocks in order to anticipate which stocks have a high probability of making a big move. You can learn all of the characteristics of momentum stocks in this article here.

Get Started With Our Free Trading Kit

Our trading kit is the best free resource out there for new and struggling traders. It includes:

• Intro to Trading Course
• Comprehensive Trading Handbook
• Trading Consultation

Download your free trading kit here.

The post Who We Are As Momentum Traders | Momo Trader Day 1 appeared first on Bulls on Wall Street.

Marijuana stocks have been hot the past couple of weeks. We took some trades on several cannabis stocks in the past week, capitalizing on the sector momentum. CGC, CRON, TLRY were a few names we traded recently. So how do you find sector momentum plays and how should you trade them? In our latest video lesson we go over how to find and trade pot stocks, and the best patterns to capitalize on their momentum:  

How To Find Sector Momentum

You need to be running sector scans every night. Every week you need to be figuring out where the money is flowing. TC2000 allows you to run industry index scans by percentage gainers (usually within the past 5 days). This is a quick and easy way to see what sectors are strong.

Once you see what sectors are strong, you should figure out which stocks are leading the sector momentum. You have to do the homework the night before and the morning before the market open. Do not rely on someone else to tell you what stocks to trade on any given day. All the successful traders I know are self-sufficient.     

How To Trade Sector Momentum

Now that you have identified a sector that is running and have found stocks that are leading the momentum, you need to figure out which stocks will be on your watchlist. As momentum traders, we want to find the stocks in the sector that have highest probability of a explosive move. That is the most efficient use of your capital and time. CGC (WEED for Canadians) was a great stock to trade yesterday, because it fit all the criteria of a high quality momentum stock.

CGC had major expanding volume, a major daily breakout on its daily chart, and gave us a great intraday setup to get a low risk, high reward play. CRON was another stock you could have traded, that had all of these characteristics. CRON has had a history of making huge moves as well, like it did back in December of last year, and could go on a multi-day run.

Keep These On Watch For Upcoming Days

These stocks will be on the top of my watchlist for continuation momentum this week. When a momentum sector heats up it can often run for several days and sometimes weeks. They always run further than you think, and the run has barely begun in these marijuana related stocks. CRON and CGC just had a day 1 breakout on their daily chart, and they both have a ton of room to run.

The last major sector run was the China stocks back in June. Look how far they ran, even when everyone was talking about how overbought they were. Fundamentals matter very little during these major sector runs. But at the same time, these are not stocks worth marrying for much longer than a swing trade. Keep these on watch for the rest of the week!

Free Webinar On Weed Stocks

Join our next live webinar where we will go through all Weed Stocks we’re trading. Reserve your seat here. 

The post How to Trade Momentum Weed Stocks appeared first on Bulls on Wall Street.

If you are wondering how to use volume in your trading to find the best momentum stocks, you should read this article thoroughly. It is a crucial variable for determining a potential momentum stock, for day trading and swing trading.  

What Is Volume?

Volume is the number of shares that is bought and sold of a stock over a given time period. When you using candlestick charting, you will see the number shares traded on one candle stick, usually at the bottom of the chart, of whatever time frame you are looking at.

For example, if you look at daily chart time frame, you will see the number of shares traded each day of a stock. If you switch to the 5 minute chart, you will see the number of shares traded every 5 minutes of a stock.

The Importance Of High Relative Volume

The best momentum stocks have high relative volume. This means they are trading well above the typical number of shares they trade per day. Stocks will usually trade at above-average levels of volume when they are gapping up or down due to some type of catalyst, like earnings reports, FDA approval, or analyst upgrades or downgrades. Check out the daily of TWLO:

You can see on all of the days when it is gapping with higher than normal volume. TWLO usually trades about 3-4 million shares per day. However, on those days where it was gapping up or down with a catalyst, it trades between 10-20 million shares that day.

Notice that it also trades larger than its typical daily range that day as well, which is exactly what you want as a day trader, because this means you are likely to capture a big move in the stock if you get the right entry.  You can learn more about the characteristics of the best momentum stocks in this article here. 

How To Know When A Stock Will Have High Relative Volume

New traders will not only ask about how to use volume, but also how to know beforehand when a stock will trade at above-average volume. A stock that is gapping up or down more than 4% with a catalyst will usually be trading with higher than average volume that day.

However, another big indicator is to pay attention to how much volume comes into the stock at the market open in the first candle. Let’s look at the TWLO intra-day chart on 5/9 when it was gapping up in reaction to strong earnings:

You can see that it traded almost a million shares on its opening 5 minute candle, about a quarter of what it typically trades in a whole day in just 5 minutes. When you see this much volume come in this early in the day, there is a very high probability that it will trade at well above average volume that day.

Compare it to the opening 5 minute candle of a typical trading day. When you see a stock trading with that much volume at the open, is it a strong candidate to have momentum and go on a strong trend that day, especially when it has a breakout on the daily chart.  

Technical Breakouts and Breakdowns

Momentum stocks can still trade at above-average volume without a catalyst. Another cause of a stock trading at above-average volume is a technical breakout on the daily chart. Look at the SQ daily chart when it broke out in March:

You can see the volume that came into the stock after it broke out above that 48 level. Stocks just having technical breakouts will usually not experience as large of a volume increase compared to stocks gapping with some type of catalyst. However it is still a good indicator of when a stock could be beginning a strong trend intra-day, or on the higher time frames for a swing.

The best momentum stocks are stocks that are gapping above resistance (or below support for a short play) on an earnings catalyst, and are trading at above-average volume pre-market and at the market open.

The post How To Use Volume To Identify The Best Momentum Stocks appeared first on Bulls on Wall Street.

This is especially important when you’re trading volatile, momentum stocks. Getting too emotional can result in you failing to obey your stop losses, taking profits too early, chasing bad entries, and many other bad outcomes for your capital.

You need to be self-aware and know when you’re starting to get emotional, and what you can do to prevent emotions from affecting your trading decisions. Here are 5 ways you can minimize the effects of emotions on your trading:

Prepare Before The Market Opens

Proper preparation will eliminate a lot of emotions in your trading, and the surprises the market might throw at you that trading day. You need to create a watchlist either the night before or during premarket in the morning of stocks that fit the setups you perform best in. For every stock on your watchlist, you should have an entry and exit strategy prepared.

Momentum stocks move so fast that you need to know beforehand what prices you will be looking to enter at, where your stop loss will go, how much money you will risk, and at what prices you will start to take profits at.

Trading becomes much simpler when you prepare. Once you’re in the trade, the stock either hits your stop or your profit target. You know exactly what will happen in either scenario.

Know Exactly How Much Money You’re Risking Every Trade

As mentioned above, you need to know exactly how much you should be risking on each trade you’re looking to take. This allows you to know the worst-case scenario. If you’re looking to long a stock if it breaks over $40, and your stop loss would go at 38$, you need to know how much money of your account you will risk in order to figure out how many shares you would take.

If you’re risking $200 on this trade, you would buy 100 shares of the stock in this scenario. Knowing exactly what the worst-case scenario will be on trade will take away the fear in you. Learn more about how to place your stop loss correctly in this article.

Risk Proportionally to Your Account Size

If you’re risking 50% of your account on a trade you will most likely be trading with a lot of fear. You need to be risking a small enough proportion of your account that your life/net worth would hardly be affected if you lost the money.

Ideally, you’re risking no more than 1%-2% of your account size, but this number will vary based on your risk tolerance. If you feel like you cannot leave your computer to go to the bathroom or grab lunch, you need to be reducing your position sizes. 

Hide Your Unrealized PNL

Watching your PNL fluctuate is an easy way to distract yourself from what the market is telling you. It can lead you to take profits too soon, since you will see yourself up a certain amount on a trade, and you will think that number is good enough to take profits.

Watching how much you’re up or down in a trade will shift your attention to the money on the line rather than what the market is signaling. You should hide your unrealized PNL, and just have the chart of the stock you’re trading up in front of you.

Leave Your Computer/ Stop Trading

When you feel yourself getting emotional during the trading day, a great way to calm yourself down is to step away from the screens. Go outside, get some fresh air, and don’t come back until your emotions have subsided. If it’s past 11am and you’re a day trader, it is rarely a good idea to be putting on a bunch of new trades.

Everything is much choppier past this time, and it is not the time to be trying to make back lost money. Instead, use this time to prepare how you will trade these stocks the next trading day in the morning. Afternoon trading will more often than not just make you even more stressed out and red on the day.

Don’t Miss our Live Webinar on Monday 1/27

“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”

In our live webinar, we will show you how to find and master a ONE trading niche, and avoid the noise.

Click here to sign up for the webinar

The post Momentum Stock Trading Tips: How To Prevent Emotional Trading appeared first on Bulls on Wall Street.

Once you know all of these characteristics, you can distinguish between the high-quality setups and the low-quality ones. Knowing these characteristics will give you conviction behind the capital you’re putting at risk because you know you’re in a high-quality setup. Here are 7 characteristics of the best momentum stocks.

1. Low-Float

If you look at all the stocks that have made the biggest movers this year, you will notice that all of them have a low float. A stock’s float is how many shares of the stock is available to trade to public investors. A stock that has a low float, defined as 100 million shares or less, is more likely to make big moves. It is simple supply and demand.

2. Strong Catalyst

Strong catalysts are almost always behind a big move of a momentum stock. The best catalyst is an earnings catalyst, because it has the attention of investors on all time horizons. Other catalysts like FDA approval, analysts upgrades, and other guidance related catalysts are good as well. Some catalysts you want to stay away from are buyouts, buyout rumors, or any other type of rumor that is nothing concrete.

3. History of Making Explosive Moves

If a stock has made big moves before, it is likely to do so again if it breaks out or has big news. You should always look at the past 12-24 months on the daily chart and look for times it has had big green daily candles on high relative volume. If it has happened before, it is likely to happen again. For information about how to play momentum stocks, check out this article.

4. Liquidity

Liquidity is essential for any stock that you trade. If you cannot enter and exit at the prices you want to you will lose a lot of money in slippage. You want to see an average daily volume of at least a million shares on the stocks you’re looking to day trade. Intraday patterns do not play out as well on illiquid stocks either.

5. Clean Daily Charts

You want to be playing stocks that have no daily resistance near your potential entry spot. To the short side, you’re looking for daily charts with no nearby support. Ideally, you’re also away from all the major moving averages, as they can be a reason for your stock to stop going in your favor.  

6. Consolidation on Daily Chart

Stocks get their power from consolidations and bases. Daily chart breakouts are best when the stock is consolidating for a period of weeks, months, or years below or above a certain level. Here is an example of a great daily chart breakout:  

You could see that INTC had previously held up when it gapped up, so when you see something like this gap up on the circled candle, you know there is a high probability of it trending up all day, especially after breaking out of that 3-month long base.

7. History of Holding Gains

You want to be playing stocks that make big moves but also have a history of holding on to their gains. There are a lot of penny stocks that make big moves but never hold up. This is fine to play for a day trade if you take your profits quick, but it is much easier to play stocks that you know that time is on your side. If you’re playing a stock that has a history of holding up you will have much more conviction in the day trade and especially for a swing trade.

The post 7 Characteristics Of The Best Momentum Stocks appeared first on Bulls on Wall Street.

Daily Chart Breakouts

Daily chart breakouts are a great daily context to play for momentum plays. The bias is obvious, it is easy to define your risk, and there is usually great risk versus reward. For newer traders, it is easier for most to play setups that are joining an existing trend. You want to look for long periods of consolidation before playing a breakout, like we see with SHOP above. The longer a stock is trading within a range, the more powerful the move will be when it breaks major resistance or support.

Daily Chart Breakdowns

Daily chart breakdowns is the same concept as playing a breakout, except its to the downside. You are looking for breakdowns of daily support for momentum to the downside. We see how ENDP had a great breakdown under 48ish. It had been consolidating in that $48-$60 range for almost 4 months, which is exactly what you want to see for a breakdown play.

Intraday Pullbacks 

Momentum stocks do not go straight up forever. It is easy to get FOMO (fear of missing out) when you see a stock making a big move without you, so remember you will almost certainly get a pullback at some point. Use moving averages and price support/resistance to help you manage your risk. The 20 MA is a good indicator of the short term trend, the 50 for the intermediate, and the 200 for the long term trend. Intraday we look at the 9 EMA, 20 EMA, and VWAP.

Breakouts of Long Periods of Consolidation Intraday

Stocks get their power and explosiveness from long periods of consolidation in a tight range. Waiting for a stock to pull back and consolidate for several minutes or more will give you better risk versus reward for your trades. Once the stock breaks out of this range it will usually have some great follow through.   

Criteria For A Momentum Stock:

1. History of Making Big Moves: A momentum stock is almost always a stock that has made big moves in the past. You want to see on the daily chart a history of following through and holding gains. You don’t want to be involved with stocks that have no range.
2.  Clean Daily Chart: The daily chart of the stock should not have any areas of resistance to the left if you’re looking long, and no support if you’re looking short.
3.  Liquidity: You do not want to be looking for momentum in illiquid stocks. You will usually get very little follow through, and will get a ton of slippage on your exits.
4.  Strong Catalyst: Most momentum stocks are usually moving because of a fundamental catalyst. The best catalyst is a quarterly earnings report, but other catalysts such as FDA approvals and analyst upgrades can also get stocks moving.

Best Times of Day For Momentum

The best time of day to play momentum stocks are the first hour 9:30-10:30. During this time all the patterns will tend to resolve the best and have follow through. After 10:30 the volume dies down a lot and stocks become a lot more choppy. A midday news catalyst will usually bring some volume back into a stock, and give some range and patterns to play off of.       

3 Crucial Day Trading Rules

Align Your Setups On Multiple Time Frames

You want to always make sure a daily breakout is accompanied with an intraday breakout to maximize your probability of your trade following through. The daily of the stock will tell you what the macro trend is, and the intraday will tell you the micro trend. It is sometimes useful to look at a weekly or monthly chart to get an even bigger picture idea of the trend. The more time frames you can find a breakout or breakdown the better.

Never Chase Weakness Or Strength

Momentum stocks are usually moving 5%, 10%, or even more in a space of hours. They have very large intraday ranges, and it is easy to get underwater fast if you are chasing these stocks blindly. How far a stock is trading from its moving averages is an easy way to tell if its extended or not. If it’s trading far away from its moving averages, it is considered extended. If it’s trading on or near them, it is considered to have pulled back. It is best to wait for momentum stocks to pullback and consolidate by their moving averages or price support/resistance for a bit before entering for the next push.

Know Your Stocks’ Float, Sector, and Catalyst

You don’t need to sift through every single SEC filing in the past month of the stocks you day trade. You should always be aware of these fundamental characteristics:

• A stock’s float will tell you it’s potential for an explosive move. A low float stock (100 million shares or below) is more likely to make a big move than a stock with a larger float.
• Stocks in certain sectors are not good for day trading, while other sectors are perfect for it. Retail stocks for example are usually slow moving and don’t have much range. Biotech stocks in contrast tend to have large ranges and make explosive moves.
• You should always know why a stock is gapping up or down before the market opens.  Some catalysts will not create any momentum. For example a buyout may result in a gap up, but the stock may just trade flat for the whole day. If a stock gaps on earnings, that will likely provide some good momentum and range to profit it from that day.

Get Started With Our Free Trading Kit

Our trading kit is the best free resource out there for new and struggling traders. It includes

• Intro to Trading Course
• Comprehensive Trading Handbook
• Trading Consultation

Download your free trading kit here.

The post Step By Step Guide For Trading Momentum Stocks for Beginners appeared first on Bulls on Wall Street.