We have thrown a lot of information at you the past couple weeks. Now that you have a foundation of the basics of trading stocks, let’s get into the specific trading style we use at BOWS. We will give you an overview of our style in this article, and we will talk about how we find the stocks we trade, the characteristics of the stocks we trade, and my specific style of trading.
How I Find The Stocks I Trade
I use a trade ideas scanner to find the best stocks to trade. Every morning I look at all the stocks that are gapping up 4% more, and stocks that are gapping down 4% or less. I will filter these stocks gapping up and down by volume, float, and sector. The night before a trading session I will run this scan to see what stocks moved during the trading day, and keep certain stocks on watch for the next trading day to see if they will have follow through momentum. If you are interested in learning more about the scans we use, check out this article here for a complete overview of the scans we use on Trade Ideas.
Characteristics of The Stocks We Trade
The stocks I love to trade are volatile. Mainstream finance says that you should be afraid of volatility, but day traders like me are always on the hunt for volatility and range. Volatile stocks are the stocks that can give you 5%-10% returns (sometimes more) in just minutes. The stocks that are the most explosive are low float, have high relative volume, are gapping up or down with a news catalyst, and have a clean daily chart.
A stock’s float is how many shares of the stock is available to trade to public investors. A stock that has a low float, defined as 100 million shares or less, is more likely to make big moves. It is simple supply and demand.
A clean daily chart for a stock has no daily resistance near your potential entry spot. To the short side, you’re looking for daily charts with no nearby support. Ideally, you’re also away from all the major moving averages, as they can be a reason for your stock to stop going in your favor.
My Style of Trading Stocks
As mentioned above, I am primarily a day trader who trades momentum stocks. I usually just trade for the just first 2 hours of the trading day. After 11:30 AM, the momentum and volume of stocks decrease significantly, and the patterns that I look for in stocks have tend to have worse follow through.
I like to scale in and out of my positions. This means I don’t just buy and sell all of my shares at once. I like to sometimes buy half of my planned position size at first, and then buy the other half once the trend is confirmed. I also like to sell half of my position when I am up on my trade to lock in profits, and then let the other half of my position ride for a bigger move.
If trading volatile stocks is something that is not suited to your time commitment or personality, swing trading is a style of trading you should look into. Paul Singh, my former mentor, teaches BOWS students how to swing trade, which involves trading momentum stocks on a bigger time frame. This means if you have a full time job and cannot be by a computer to day trade stocks, you can still participate in a stock’s movement.
Sign Up For The Free 4-Day Live Course
We will go into more depth on our style of trading in our free 4-day live course starting this Sunday. If you missed our last post of the Bulls Elite Series on how to align your trades on how to transition from a 9-5 job to trading stocks full time, you can check it out here.
Reserve your seat for the free 4-day live course here.
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