Momentum day traders try and focus their attention on high volume stocks that are moving significantly in a short period of time. Day traders may hold a position for just a couple of minutes or a few hours, but they are typically very active and attentive traders. The idea is to find a stock that is going to rise a lot in one day and ride that stock to a desired, or set, profit amount. Here are three simple ways to get you started learning momentum day trading strategies.
Die-hard day traders love those midday swings that can easily translate to midday profits. Day trading strategies are based on that. Although retail trading usually dominates the first hour or two of day trading, the rest of the day typically belongs to day traders and market professionals. When the market opens, it can create an up or down swing that can, and often does, persist throughout the rest of the day. When that tape starts to quiet down at the beginning of the day look at the opening hour range, this helps you measure the selling and buying pressure for the day. This can help you see short term support and resistance levels that will help you determine profitable entrance and exit buying points. You can use these entry and exit signals as guidelines for midday swings to hopefully help you net some early afternoon gains.
Tune out the Noise
There is just too much information out there for you to process it all and be a successful momentum day trader. Successful day trading is all about tuning out the extraneous information and honing in on what’s going to make that stock move up or down. The best day trading strategy is to never take information at face value, try and evaluate the information differently and independently validate or invalidate the information. Once the information has been analyzed, you can see if there are any good day trading opportunities.
Make Small Mistakes and Don’t Repeat Them
The more you trade, the more you’ll learn and. Most importantly, you need to know that you will make mistakes. The key is to make small ones and not repeat them. You should learn as much as possible before you start momentum day trading and keep track of what works for you and what doesn’t. Not all successful day traders use the same strategy, so experiment and find what your strengths and weaknesses are. Try leveraging your strengths but always being aware of your weaknesses.
Internalizing momentum day trading strategies is like most things in life, we start by learning the basics and then learn more as we gain experience and confidence. What advice would you give to someone new to day trading?