Those who have taken losses or nominal losses will tell you not to go for shor t term trading. That is because short term trading is short time – one must be quick to make the moves without greed/hope/fear. Here is how you can maximize your gains in short term trading through momentum trading stocks.

Momentum stocks are characterized by their  volumes and large price swings in a short time (both up or down).  The way to identity these stocks is to look at the list of stocks in daily top gainers/losers, 5 day top gainers/losers, in some websites/magazines you can even find the list of them under momentum stocks of the week.

The key is the change in the average daily volume of these stocks when compared to the same before two or more months.  

Once you have the list of these stocks. Then watch their candlestick or bar charts.  Candlesticks help it easy to identify the trend reversals, pullback signs because of their color differences.

Now these are stocks that make their moves in a short period of time. However that does not mean they keep moving up and down all the time. They do indulge in range trading for longer periods but the biggest price moves and high volume days don’t last for more than a week.

When you have a list of such stocks, it helps to avoid waiting which happens with only one stock. In the list identify stocks that pulled back from their recent high values and keep waiting for the day the stock makes a white candlestick after a black one opening at lower price than yesterday’s close price.

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Jeff Cooper’s 5 Day Momentum Trading Method for Quick Profits »

Your trade or entry (in this case for long position) should be with buy stop order on the following day at a price stop little higher than the today’s high. This makes sure that you don’t enter if it is false white candlestick and enter only if the uptrend is starting. You pay a little price by buying higher than today’s price for this confirmation and avoid losses that come because of greedy buying without enough thinking.

Once you are in, watch the stock till it makes a black candlestick after 2 or 3 white candlesticks and get out the next day the price goes below the low of the black candlestick. This is Jeff Cooper’s 5 day momentum method.

One downside to this is that you can’t always expect big gains with this as it needs practice to master the art of making right entries and avoid false white triggers. However when profits come they come in huge chunks to compensate for the initial losses you may encounter.

Good luck with your short term momentum and don’t forget to read more of my articles on stock trading.

Disclaimer: Stock market trading is not a game of kids. Hence always caution is advised as the stakes are high. Use your discretion and cautiously invest in stocks/shares. The following are author’s views only.

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