Welcome everyone to THEFREEDOMGRIND blog, all about day trading and stock market trading. This is going to be an important article for those of you that would like an in depth look at some of the ways you can strategize, and make trades on momentum stocks. I will ask that you use the LIKE and Follow buttons that are at the bottom and on the home pages to support THEFREEDOMGRIND!!!!
As a Day Trader, I can tell you that a majority of profitable trades happen within the first hour and a half of the trading day (typically). The U.S Market opens at 0930 AM EST, and from the open until about 1100 AM EST you will find higher trading volumes. This timeframe in the market is volatile, and stressful to a degree, but if we can cut through the emotional tension that comes with trading these volatile times, we can instead practice and utilize our strategical mind as opposed to our emotional minds. We will be discussing two different strategies in this article. Let’s take a look at a couple of different approaches to trading the open.
The Image above is the 1 min chart of OTLK on Friday May 17th, 2019. The Red lines represent what most traders call a Flag Pattern. This is a common day trading term that is essentially describing Pullbacks on a strong upward trend. The Blue circles show the points on the chart that would have been optimal for an entry into a position. For new traders, it still may be hard to judge because physiologically, we second guess whether or not the position will play out. Most new traders will not be able to pull the trigger until the later part of the trend when it is actually much more risky. With these types of Flag Pattern entries, we need to get in on the earlier parts of the trend. The more we tell ourselves its too risky, its too risky, and then pull the trigger at the end, the more we put our capital at higher risk. One of the hardest things to do as a beginner trader is to just pull the trigger!!!
This image is the same as the first, but, looks at a different strategy. In this picture, the horizontal red lines represent resistance points, and the Blue circles represent optimal entries based on the resistance breaks. This is an easy strategy to implement, however, the downside is that there is more risk. The way to think about this one, is that you need to have a solid stop out point. If you place a limit order to fill just before, or right on top of the break, you should see an almost immediate resolve. If the trade does not perform quickly, it most likely is a sign to jump out quickly, so being fast to see a problem and to act on it is critical.
This was a pretty quick rundown of some simple open range day trading strategies. Take what you have learned in this article and practice in a simulator account before applying these types of strategies in a live money account. They are effective, but keep in mind that the particular low float stocks that these types of trades work on, go through cycles of high momentum as well as periods of slow momentum. Understanding the type of market that is current will help you just as much as these strategies.