#DayTradingStrategy Momentum Chart Patterns

If we really analyze this pattern, what exactly is happening here? The stock surged up, likely due to breaking news. Then there is a period of profit taking. People who were in at the beginning of the move when the news was first released take some profit. Short sellers perhaps establish positions to profit from a decline. We see the stock pullback and I use my technical indicators to watch for levels of support. The stock should not retrace more than 50% of the initial move. Ideally, it will pull back to the support of the 9ema.

Where to Buy a Strong Stock

To briefly summarize how I trade this pattern, I'm buying the moment a green candle breaks over the high of a previous red candle. This is where the trend shifts from pulling back to moving back up. My max loss is the low of the previous red candle and my profit target is that the stock hits a new high of day. There are times when characteristics of this pattern do not offer a proper 2:1 profit-to-loss ratio. In those cases, I will not be able to take the trade.

Other considerations that will affect the outcome of the trade include the time of day, the price of the stock, the daily chart of the stock, the quality of the news, and whether or not this is the most obvious stock to trade.

Some momentum traders will adopt a scalp trading strategy. Scalp trading is when you execute many small trades while a stock is moving higher. Scalp traders need to have very high percentage of accuracy because if they experiencing a large loss it will wipe out several small base hit trades.

A few of the other momentum day trading chart patterns I trade

VWAP Breakout Pattern

Gap and Go

Penny Stocks for Day Trading