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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade
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To: Ken Wolff who wrote (393)2/2/1998 7:47:00 PM
From: Ken Wolff  Read Replies (2) of 2120
 
Gainers (IV):

Here is an hands-on paper trade excercise I ask my students to carry out when learning to trade gainers:

STEP 1:
Watch the bid and ask and notice the rhythm as it falls from the open.

STEP 2:
Note the price at the FIRST PAUSE (the price where the bid and ask has stopped falling).

STEP 3:
Watch for trades in-between the bid and ask.

STEP 4:
Now pretend you buy with the first few buys (there will be some selling but notice when the buying picks up)

STEP 5:
Count the seconds until the stock upticks in price. Usually you will need 20 seconds to get into the trade.

STEP 6:
Now watch as the bid and ask starts a rhythm in the climb up from the first bottom.

STEP 7:
If you get a small uptick and then the gainer comes back to your buy price do not sell until you see selling at the bid. This up and down activity at the bottom I call "teetering"

STEP 8:
As you watch the definite climb off the bottom, notice the rhythm of the bid and ask as it goes up and then the PAUSE.

STEP 9:
Now write down the price (bid) you would sell at when you see one or two trades occurring at the bid price.

STEP 10:
Count the seconds to execute a Market sell. Write down the price you see at the end of 20 seconds.

Depending on the market one may wish to hold through the early oscillations in hopes of more profits. Take into account the market mood and keep your diary updated as to the normal activitiy of your trades. Never allow your trade to go below your exit price (the bid when you first bought).

Good Luck,

Ken
mtrader.com
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