Day trading strategies: the complete guide with all the advanced tactics for stock and options trading strategies. Find here the tools you will need to invest in the forex market

CHAPTER 24:
 
 
Momentum Trading
omentum is at the heart of all-day trading as finding trades
with the right amount of momentum is the only way you can
reliably guarantee a profit on your trades. Luckily, it is not
unrealistic to expect to find at least one underlying asset that is likely to
move as much as 30 percent each day due to the fact that all underlying
assets with this much momentum all tend to share a few common technical
indicators.
Momentum stock anatomy
While it might seem difficult to understand how anyone could expect to
pick a stock with the right momentum out of the thousands of possible
choices, the fact of the matter is that all high momentum stocks typically
have several things in common. In fact, if you were given a list of 5,000
stocks, using the factors below you could likely come up with a list of 10 or
less.
Float: The first thing you are going to want to keep in mind is that the
stocks with the highest momentum are generally going to have a float that is
less than 100 million shares. Float refers to the total number of shares that
are currently available and can be found by taking the total number of
outstanding shares and subtracting out all those that are restricted or are,
functionally speaking, no longer traded. Restricted shares are those that are
currently in the midst of a lockup period or other, similar restriction. The

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less float a stock has, the more volatility it is going to contain. Stocks with
smaller float tend to have low liquidity and a higher bid/ask spread.
Daily charts: The next thing you are going to want to look for is stocks that
are consistently beating their moving average and trending away from
either the support or resistance depending on if you following a positive or
negative trend.
Relative volume: You are also going to want to ensure that the stocks you
are considering have a high amount of relative volume, with the minimum
being twice what the current average is. The average you should consider in
this case would be the current volume compared to the historical average
for the stock in question. The standard volume is going to reset every night
at midnight which means this is a great indicator when it comes to stocks
that are seeing a higher than average amount of action right now.
Catalyst: While not, strictly speaking, required, you may still find it helpful
to look for stocks that are currently having their momentum boosted by
external sources. This can include things like activist investors, FDA
announcements, and PR campaigns and earnings reports.