Warrior Trading Blog

Building An Edge In Trading Momentum

Building An Edge In Trading Momentum

There are multiple sequential steps to follow in becoming profitable as day traders. In fact, it would be silly to believe that anybody can have real success in any business at their first attempt. That is why I always insist on the fact that perseverance and hard work are unavoidable steps in every successful trading career.

In order to position yourself in the best ten percent of traders that makes money consistently, knowing how to apply a proven strategy is a necessary but not sufficient condition for the ultimate success. Whatever day trading strategy you are focusing on, accruing experience on a daily basis will be the differentiating factor between losing or winning the game in the long run.

Especially when trading momentum, the degree of reactivity required is much higher than the one needed for every other strategy. Here is why I’m putting the attention on a specific practice that will give a substantial edge when it comes to anticipating big moves. It will be particularly important for avoiding big losses that is a key ingredient for maintaining a permanently favorable risk/reward ratio.

When planning for a trade on a low-float stock, there are multiple details that need to be in place in order to be able to manage the same trade once jumped into it. In courses like the ones that are offered by the WarriorPro program you’ll find every one of those but over here I want to focus on what is probably one the most valuable mental approach into successful momentum trading.

The break-out or bail-out mentality

When entering into a momentum trade, which is by definition a “long” trade, what we want to see is an immediate resolution to the upside. If that happens, it will be easier to just follow the trade plan. But if it doesn’t happen, there is a very high probability of a strong rejection resulting in a false break. This is why stopping out as soon as the break-out fails to materialize is a great habit.

Therefore, this approach will have a double positive impact:

  1. To trim out the loss or ending up break-even without waiting for it to hit the planned stop;
  2. To help maintaining emotional composure for the rest of the trading day.

In order to develop this kind of sensibility, a considerable amount of experience of watching the level 2 data is required. So, my best suggestion is to continue to study the price/action intensively in order to make these dynamics part your core knowledge.

Once this one aspect is really clear and this process well in place, it will mean that the level of emotional discipline is growing nicely. And so, that a critical part of your trading career will be ready for an essential step forward.

See you in the chat room.

Trade safe,

Roberto Barbaro