July 11, 2011
- in Uncategorized by schooloftrade
Speed of Momentum is very important, here’s why
When momentum goes overbought to oversold quickly.
What is momentum?
– Measured with our JJ-Momentum indicator
– Momentum = mass x force
– Mass = size of the orders
– Force =speed of the orders / disposition of orders
Overbought = buyers are running out of momentum, they are losing control over price, and expect the sellers to soon grab hold and reverse price back down.
Oversold = sellers are out of momentum, the buyers may soon grab this and pull it back up.
My simple rule….do not sell with oversold, and do not buy with overbought.
The time it takes to move from overbought to oversold is a BIG CLUE.
Failure patterns are one of the easiest to find with this technique.
When momentum goes from overbought to oversold very quickly, toss out the wave pattern and use the 2-step price reversal pattern.
Just make sure you have enough ROOM/RANGE to take the trade.
What do I mean when I say ‘I need more consistency’?
– Think of the traffic on the highway
– When traffic is moving quickly, no accidents, no stops and starts, this is consistency in traffic.
– Lack of consistency in day trading is when we don’t have the speed, moves, the personality all working well. Stops and starts, fails to move, very slow, then very fast.
– Consistency to a day trader means consistent speed of the tape, big money on the tape, and new higher highs and lower lows.
“if the buyers fail, and the sellers don’t immediately come into the market, this is a big clue”
Wave Pattern there are three different ways to enter:
1. At test of trigger line
2. At the break of the ‘pressure point’
3. At the break of the swing low
