Surf the Waves of Momentum
Learn how to manage risk correctly while scalping.
Short Video demonstrating a Scalp Trade
Pre-Market High Break
This is the set up that a lot of traders look for immediately after the bell rings to secure early gains that act as a cushion for the rest of the morning. Usually, the trades that have the best follow through are when most traders have a majority of their attention on the ticker. Additionally, if the pre-market high break happens a few minutes after the bell rings the breakout generally be significant. However, the longer time goes on into the morning the less chance of this set up working. If the premarket high is broken closer to noon, then the chance of a fake out is significantly increased as most trades will be done for the day and volume will be lighter than first thing in the morning. The criteria for a great setup would be that the stock has light volume (under 1 million shares traded), positive news, and is on gap scanners.
Bull Flag
A chart pattern that when materialized resembles a flag and includes “Bull” because price is ascending. The first leg of price action is the pole and is accompanied by a spike in volume. This usually occurs after a positive news story or some other significant event. Next, is a consolidation period and this is when most traders are looking for an entry, which is usually when next candlestick makes a new high or when the prices breaks over the high of the flag. They key for this set up to work though, is that buying volume needs to surge again at a similar rate of the first leg. Also, keep in mind that the first and second pull backs are safest and generally have best follow through as most other traders will take the same trade. This brings in more volume in favor of the trade. The importance of reading the momentum (rate at which volume is changing) cannot be stressed enough. One can imagine this style of trading as surfing the waves of volume in the market. Overall, this is probably the best strategy for someone who is just starting because it is the requires little risk taking, is easily identifiable, and very scalable. However, most traders make the common mistake of not associating the price action with volume.
