What is a momentum shift? [THREAD]
A momentum shift (that’s how I call it, don’t know if it exists under a different term) is exactly what it sounds like.
It’s when people say “This one isn’t the one.” and move on to find a different setup.
#MomoEdu #TradingTips
A momentum shift (that’s how I call it, don’t know if it exists under a different term) is exactly what it sounds like.
It’s when people say “This one isn’t the one.” and move on to find a different setup.
#MomoEdu #TradingTips
The thesis is very straightforward - have you ever been watching a stock with high expectations only to see it knife and then fade all day?
Well, you’re not alone. There are hundreds of people just like you who were also waiting for a good setup to form/were already in.
Well, you’re not alone. There are hundreds of people just like you who were also waiting for a good setup to form/were already in.
Let’s split the market participants into two groups - smart traders and “dumb” traders.
Smart traders are educated, very intelligent, and/or experienced. Novice traders are new to trading, they chase, have FOMO, and generally have no idea what they’re doing.
Smart traders are educated, very intelligent, and/or experienced. Novice traders are new to trading, they chase, have FOMO, and generally have no idea what they’re doing.
Almost every day there’s a ticker that most traders have on their watch lists. These are usually top gappers.
These tickers have enormous volume during the pre-market and after the open. And I repeat, everyone is watching it.
These tickers have enormous volume during the pre-market and after the open. And I repeat, everyone is watching it.
At the open, the stock tanks. That’s normal, the open is always very volatile. But then it drops again!
What are the two previously mentioned groups doing?
What are the two previously mentioned groups doing?
Smart traders give up. They know that the market will always offer another opportunity. They pull out their scanner and look for a different stock.
The dumb traders? They’re staring at the screen, hoping for a reversal. Some of them are already holding bags!
The dumb traders? They’re staring at the screen, hoping for a reversal. Some of them are already holding bags!
And this is when the momentum shift occurs. Traders will look for the next top gainer - what is it doing?
Say it’s currently consolidating after a rally on good volume. That’s appealing to them, and they buy.
Say it’s currently consolidating after a rally on good volume. That’s appealing to them, and they buy.
And that’s when volume comes in and the stock takes off in no time on massive volume.
The previous ticker? Everyone already forgot about it, some traders are playing the bounce but it won’t reach its previous highs.
The previous ticker? Everyone already forgot about it, some traders are playing the bounce but it won’t reach its previous highs.
This is especially noticeable during this time of the year when we usually have only one stock moving at a time.
People are hungry for a runner and when something is running, they’ll want to get in on the dips.
People are hungry for a runner and when something is running, they’ll want to get in on the dips.
Always be open to other opportunities. Keep your scanner open and go where the volume is.
When the leader tanks (doesn’t have to be during the open, can be in the middle of the day), look for a different candidate.
When the leader tanks (doesn’t have to be during the open, can be in the middle of the day), look for a different candidate.
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