How to use momentum to find swing trades | stockbee


How to use momentum to find swing trades

Swing trading s a style of trading in which speculators profit by capturing part of a explosive move with low risk. It is active trading style that looks for several hundred trades a year.

There are many different ways to swing trade that I know of , but I focus on primarily swing trading stocks with established momentum.

When a stock has momentum it exhibits certain tendencies and if you study those tendencies you can profit from them.

ATHM is recent example of swing trade on a stock that had just started a momentum phase as defined by my momentum indicator Stockbee Trend Intensity.

Everyday I scan for stocks with Stockbee Trend Intensity above 1.05. ATHM showed up in these scans for first time on September 26th. On September 30th , it showed up in my Anticipation Scan as it had consolidated for 7 days after establishing momentum. On October 3rd it had a  breakout and as I had it in my watch list I saw it early.

In these kind of swing trades the stop I use is low of the entry day which was 24.37. The stock had follow through next day and was up 6.93%. I closed part of the position to lock in quick profits. Third day it was up more till 10:30 AM before fading the gains. But by then I had exited the trade at 27.87. I always like selling in to strength. the stock did move a bit more after that before fading the gains. But by then the trade was over for me.

If you see this stock, it made 16% move in 3 days before fading yesterday. That is the kind of momentum burst which show up regularly on momentum stocks. 

The key to trading  these kind of move is to understand the nature of these moves. These moves are just 3 to 5 days move. So I am looking for exit on 3rd day if trade has already made 8 to 20% by then. Exiting in to strength is best in these kind of trades. 

How can you find these kind of trades?

The entire process to identify and trade these kind of moves has been detailed on this blog multiple times. If you study the posts highlighted in the sidebar you will see detailed guidelines to scan for these setups.

If you are serious making money swing trading, invest in a software, setup scans, find stocks with momentum , develop process to trade them. If you can do that you do not need  stock picks from others. 

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