Guide to Day Trading Strategies

that created a 20 point move. The stock retraces to its moving 
averages before 
À
 nding support and moving back up.

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R O S S C A M E R O N
22
Breaking News & Intraday Extremes
In addition to extreme stocks that are former runners or have low 
Á
oats, there are also going to 
be stocks that become irrationally weak or strong in the middle of the day. The midday strength 
or weakness can sometimes be attributed to breaking news. When news breaks in the middle of 
the day, it can cause a stock to spike up so rapidly that shares will be halted by a volatility halt. A 
stock spiking 10% in 
À
ve minute can trigger these halts. It is not uncommon to see a stock spike 
up and get halted after a press release. These stocks are experiencing an intraday extreme, and 
if they are also trading on high relative volume, they become a stock worth watching for a trade. 
We will apply one of our trading strategies, covered later in this book, to these breaking news 
setups. In addition to stocks surging on breaking news, we also have stocks that will begin to 
trade at intraday extremes for no apparent reason. As long as these stocks are trading on high 
relative volume, they become a stock in play, even if we do not have an obvious catalyst. We 
would prefer to trade stocks with a clear catalyst, but since we know the market can be irrational, 
we do not want to discount any stock that is moving with suf
À
cient volume.
Stocks Selection as Risk Management
Trading the right stocks can help reduce your risk as a trader. The majority of stocks in the market 
are not suitable for day trading on any given day. As day traders, we are only interested in the 
highly active stocks each day. This means we must be quick to adapt to changing markets. Some 
months we trade pharmaceutical stocks while other months we trade technology stocks. The 
market is constantly changing, but we can rest assured that every day there will be a stock trading 
on heavy volume due to news. Regardless of bearish markets or bullish markets, there will always 
be volatility in the market and that will keep day traders in business. As hunters of volatility, we 
begin each day with a review of the pre-market movers and continue through the day with a 
sharp eye for stocks coming in and out of play. As you continue reading, you will begin to learn 
about trading chart patterns on the right stocks while applying good risk management principles.

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23
CHAPTER 4