Identify Momentum and Velocity Runs for Swing Trading
When the Stock Market moves with plenty of momentum and velocity activity, it provides opportunities for Swing Traders to hold a trade through a 1-10 day run up then exit before the stock encounters profit taking.However Swing Trading requires the ability to quickly distinguish between a “Momentum Run" and a “Velocity Run" which are both Swing Trading Style Runs. This is because each is different in how long you can hold the stock, how far it is likely to move, how it will behave when it meets resistance, and where to place trailing profit stops. Many Swing Traders exit these stocks too soon.
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If a Swing Trader exits too soon they miss out on the significant profit potential Momentum Runs create. Therefore, it is critical to learn to distinguish between a Momentum Run and a Velocity Run. When a Trader can see the distinct differences, the proper trailing profit stops can be determined which will allow the stock to run as far as it will go before exiting the trade.
Instead of settling for a .10 or .25 profit, Swing Traders can earn 3-20 points over a few days’ time with lower risk.
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A
Velocity Run which is a Sign Trading Style Run has several key elements which
include the following:
1. Volume
continues to rise during the run up, as shown in the top indicator window under
price.
2. Volume
declines before price reverses most of the time, again as shown in the top
indicator window under price.
3. Price
does not overlap, and gaps are common.
4. A
Shift of Sentiment ™ pattern occurs in large lot versus small lot Hybrid
Indicators, as shown in the second indicator window below price.
5. There
is a Volume Oscillation Quiet Accumulation pattern, as shown in the third
indicator window below, rising above its moving average line prior to the stock
moving upward.
Below is a chart example with a Velocity Run.
This stock
chart example also has one of the many new types of bottoms. It is
called a “Basing Bottom” Formation, and it tends to form as Dark Pools
buy the stock incrementally over extended periods of time. The Velocity Run is
a good Swing Trading Style Run and is marked by the green arrows on
price.
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Summary
Velocity Runs are unique to Momentum and Velocity Market Conditions. These are found in many charts right now, and they are also excellent Swing Trading opportunities. Entries are made as the bottom starts to move up and in the chart example, this stock has had a 4 day run thus far.
The trailing profit stop must be a Velocity Run trailing profit stop in order to protect more profits, due to the higher energy in the market, and the higher risk of sudden profit taking.
Trade Wisely,
Martha Stokes CMT
Chartered
Market Technician
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in losses. Examples presented are for educational purposes only.
Velocity Runs are unique to Momentum and Velocity Market Conditions. These are found in many charts right now, and they are also excellent Swing Trading opportunities. Entries are made as the bottom starts to move up and in the chart example, this stock has had a 4 day run thus far.
The trailing profit stop must be a Velocity Run trailing profit stop in order to protect more profits, due to the higher energy in the market, and the higher risk of sudden profit taking.
Trade Wisely,
Martha Stokes CMT
TechniTrader
technical analysis using a TC2000 chart, courtesy of Worden Bros.
www.TechniTrader.com
Instructor & Developer of
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