TechniTrader Beginner "Swing Trading Style Runs" Education by Martha Stokes CMT

Identify and Interpret 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.

A Velocity Run which is a Swing 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 price.  It is the green line in the third chart indicator window, rising above its moving average line prior to the stock moving upward.

 Below is a chart example with a Velocity Run.

Stock chart example Velocity Run - TechniTrader

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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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.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock Market& Option Courses

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