Momentum Trading Strategy
momentum stocks are driven by volume,
The important thing to remember about momentum trading is that we should always enter near the support level.
Momentum trading will give us the lowest risk and highest reward.
It can be moving average support and a bottom of retracement.
Buying at the highs of the day is the riskiest thing in day trading.
We should always wait for the retracement; we must take that stop-loss if the stock breaks below that support level.
Stoploss must be placed below the support level to avoid the volatility of the market.
Target to be placed at 1:1 risk-reward ratio.
Momentum trading strategy is my favorite strategy.
Key Points To Remember While Trading Momentum Trading Strategy
Avoid buying the stock that already made a big move, and we should trade the stock at the starting of the momentum move.
A high relative volume should be present in momentum trading, so always screen the stock that has a relative volume that is more than 2.
Medium float stocks are the best for momentum trading because these stocks have a limited supply of shares to trade,
and a high level of demand can create a big move in just a few minutes, but you can also trade the high float stocks in case there is a piece of big news about the stock.
Scaling out is the best part of a momentum strategy; it means, as soon as the first part of the target hits, book the little of the profit and adjust the stop loss to your entry price.
If the trade ended up hitting your trailing stop loss, walking away with the small profit and in another case, if the stock continues to run, let it ride.
It confirms that we traded the stock from start to finish without exiting very soon.
You have to determine the loss of your trade, and you have to risk less and keep your rewards more.
Recognize the resistance levels on the higher time frame, make the watch list of up to 4-6 of these stocks, and trade one of them.
Always Make an entry at the first pullback, it can be a bull flag or a trend line break out in an uptrend, and it can be a bear flag or trend line breakout.
You can also make an entry at a second pullback, and if the high relative volume is present beyond the second pullback, it becomes risker to make entries unless the stock goes through a period of consolidation.
After some period of consolidation, if the stock makes a fresh breakout at a high volume, we can again trade that breakout.
This consolidation can be a triangle pattern or a horizontal channel, and bull flag, bear flag, and trend line breakouts are the popular momentum strategies.
Finding A Stock Is A Very Important Part Of Momentum Trading Strategy.
Out of several thousand stocks available to trade, only a few stocks can move in a day.
With the help of a screener, we can choose these stocks for trading.
Click on the stock screener option, and we will get data.
There will be many stocks, but we can’t trade each stock, and we have to find out the stocks among those stocks.
The time frame that should be on the screener is 1 day.
We have to choose the relative volume above 2.
You will get filtered stocks of relative volume above 2 in hundreds.
But we can’t trade all those stocks, so we will filter the stocks by setting an average volume greater than 100k.
Now you will be getting the stocks filtered.
Now apply the filter float size less than 2 billion; that will be medium float size.
Those are the stocks for the day trading.
You will be getting the right stocks by the afternoon.
Working Of Momentum Trading Strategy
This momentum trading strategy will work with the relative volume.
The relative volume will be high on particular stocks due to some news or some unusual activity.
As we have set the period as one day, we will not filter the stock here by the RSI data, and we will check the RSI value in a 5-minute chart.
Do not check the RSI value in one day chart; always check the RSI value in the 5-minute chart.
For example, in one day chart, the RSI value for reliance stock is 35.6 and the RSI value at the same time in the 5-minute chart is above 50.
RSI varies for the day and 5 minute period.
A momentum trading strategy will be useful for filtering the stocks, and we have to apply our patterns and analysis to that filtered momentum stock.
That can be a pullback, triangle, bull flag, bear flag, or any other strategy and pattern.
Momentum stocks will give low risk and high reward ratios because we are selecting the stocks that were going to perform due to the news or other financial activities.
Performance for those stocks will be huge, and volatility will be more.
My suggestion is to learn any trading course and trade according to your analysis.
Our recommended course will help to develop your trading skills in momentum trading strategy
LEARNING AND ANALYSING THE MARKET IS THE KEY TO BE A SUCCESSFUL TRADER.
If you are interested in the trading course and most probable trades, you may contact us to be a profitable and most probable trader.
Our recommended course will be helpful to improve your trading skills.
The original program will be in our private group for a trading course.
For applying these momentum trading strategy and the best strategy for intraday trading the best platform is a trading view
I am not a trainer; in the stock market, there are no trainers; all are learners.
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