Momentum Daytrading - Tricks of the Trade Message Board

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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade

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To: Ken Wolff who wrote (2031)	10/5/1999 6:53:00 PM
From: Ken Wolff	Read Replies (1) of 2120

To enable a trader to change quickly with the market one must first obtain reasonable expectations which begin before the market opens. I have found it important to track the News stocks and determine the potential momentum by remembering the average gap and volume for the various types of stories you read. For example a stock that has an FDA approval for a new flavor of tooth paste versus an FDA approval for a new cancer drug will be much different. The price will be an important factor as well because many daytraders are looking for action on cheaper stocks due to smaller portfolios. So you should begin to track and get a feel for how much gap and pre market volume you would expect for such news momentum on 5 dollar, 15 dollar, 25 dollar, 50 dollar and higher stocks. Before the market opens you are simply trying to ascertain the big picture in the days market while trying to understand the flow of the previous market. If the previous market ended the last hour with big selling you should begin to see that selling pressure reflected in the pre market gapping. I will have expectations determined by specific stories and watch the gaps climb or hold or sell off prior to the open... If gaps are climbing up to the open then I consider buyers are coming into the market early.. If the gaps are holding for the last 1/2 hour and not moving at all I will expect moderate selling at the open or even buying... If gaps are dwindling then I expect profit taking and will consider open shorts... I have found that cheap stocks will gap up and sell down very little when daytraders are active and so I will buy them the first time I see buying or the bid and ask upticks. You must also remember that the more a stock runs the more selling pressure will be built up in the stock so gaps will be another variable you must understand for risk control. If a stock has gapped up over 20% the likelihood of selling is greater than if it is only gapping up 10% unless it is a cheap stock. A stock trading at 5 dollars can gap up under big momentum 20% and not get any selling at the open. A professional observer of momentum will group the stocks together so that momentum can be understood according to the different types of expectations with the trades. I put the stocks that are gapping down big together with good volume and look for value buying near the open. I put the fresh news stocks with good pre market volume together in another group and separate them by price. I will also group together the biggest gainers from the previous day and expect dwindling momentum and more selling the longer the stocks run and the higher they go. the pre market volume and gaps tell you a story. If you learn to interpret the story you will find the key to consistent profits and be able to change when the market changes. Ken www.mtrader.com

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