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It doesn’t matter if you prefer momentum or mean reversion, there is a time and place for every trading strategy that’s out there.  

It also doesn’t matter if you prefer swing trading or intraday trading, there is a time and place for that too.  

So what’s my point?

Well, the one thing every trader and system has in common is that consistency is the key to maximizing profits. 

And that is exactly what I am focused on in Daily Deposits!

Daily Deposits is centered around a core momentum trading strategy, that when applied to markets with this type of volatility, puts you in a position to achieve incredible trading results.  

Just check out these returns sent live to all of the Daily Deposit members!

 

 

And by following a consistent trading strategy each and every day you can put yourself into a position to capitalize on trades like this!

Today, I’m going to break down to you how momentum strategies work. Why they work so well in this market, and how you can capitalize on them.

 

Predicting Massive Moves

 

Traders are like chefs… Everyone cooks a pasta dinner but I can guarantee you that no two are identical.

For instance, one chef might sear the steak differently or longer than the other chef, or perhaps salt at different times during the cooking process.  Little differences like this actually make a huge difference in the final product!

Ultimately… they may be similar but they are still very different.  And at the end of the day they are different but they both taste amazing.  

Why is that?  Because the core of the dish is based on the same few ingredients but cooking them differently will change the way the final dish is presented.

And that is what I am here to share with you…the ingredients to making a core momentum strategy that you can trade for yourself and add your own flair to.

Now here are the base components that come together to create a momentum trading strategy that has been crushing these wild markets.

 

The Momentum Trading System

 

This strategy is built around simple yet effective market indicators.  Each one has their own part in the system, and if ignored, can significantly change the outcome of a trade.  

So let’s break down and cover each one in further detail.

The 5 key components to the Momentum Trading Strategy:

  • Overall market sentiment 
  • Price action
  • Moving averages and market trends
  • Volatility Indicators
  • Trading Volumes

 

Momentum is all about catching the right stock, at the right time, and in the correct direction.  

Unfortunately, failure to identify any one of these five components and you are left holding a losing trade.

In general, setting up for a trading day all begins at the same spot… and that is getting an understanding of the overall market sentiment throughout the world and overnight trading. 

 

Overall Market Sentiment

 

This is key in figuring out which direction the market is looking to go for that day since trading momentum is all about going with the trend and not against it.

Every morning I dig into where I believe the world is taking us at the opening bell and figure out what that means for the US markets.

 

 

That means every morning you will get a recap of my pre-market analysis to start your trading day and learn how I read and decipher the overnight trading sessions before the bell at 9:30am.

Every morning I review:

  1. The global outlook overnight
  2. Sectors for the US Markets
  3. Daily chart on SPY with Technical Analysis reviews
  4. Premarket analysis in the US futures markets
  5. Jobs reports and other economic indicators
  6. Intermarket technical analysis using the VIX TRIN and TICK indicators

 

I know this might seem like a lot to you at first glance but it is one of the most efficient and quickest ways that I can cover all major topics that are impacting the markets each morning.

Prior to placing any trade, another important market sentiment indicator I reference is the NYSE $TICK indicator that alerts me to oversold or overbought markets.  

Here’s an example of the $TICK indicator:

 

Source: Thinkorswim

 

This shows three market conditions, an overbought, oversold, and neutral zone.  Each zone is used to represent one of the three conditions at a particular point in time in the trading day.  

So, now that I have a good understanding of the pre-market sentiment going into the open, the next step is to take a look at what price action looks like for the SPY’s.  

 

Pre-market Technical Analysis 

 

Now that I have gathered enough information to make a decision about the trading day, it’s best to confirm my direction using technical indicators.  

And since momentum is the cornerstone of the trading strategy at Daily Deposits I always make sure that I confirm the premarket macro analysis using these momentum indicators as my next step.

This next step is where I use a blend of the following technical analysis and indicators to confirm my macro view of the markets.

These indicators consist of:

  • Price action
  • Moving averages and market trends
  • Volatility Indicators
  • Trading Volumes

 

Here is an example of how I use those four indicators to analyze the pre-market trading session.

 

Source:Thinkorswim

 

Right away, I noticed a bunch of warning signs that this rally in the pre-market session was not going to continue.  

Here is what I saw:

  • The short term trend is higher, but weakening due to the divergence from the RSI indicator
  • The opening bar breached the upper Bollinger band but closed bearish, showing weakness
  • The opening bar closed below the increasing trendline, showing break of trend and weakness
  • TTM squeeze was showing a period of low volatility indicating a breakout to come
  • The 10 MA is starting to turn down towards the 20 MA and possibly cross lower

 

Now… before I place any trades those are the main indicators I will always review to see if I can verify my viewpoint from the macro analysis from earlier.  

This is also where I will start to look at overnight technical levels for support and resistance levels if I decide to place a trade.

My Daily Deposit members will always receive Support and Resistance prices that I came up with based on the pre-market SPY chart.  

Here is what I sent to all members based on my findings on the SPY chart:

  • Resistance: 263, 263.50, 264.76
  • Support: 260.80, 259.19, 257

 

The Trade

 

So now that I have a clear understanding of what the pre-market session is doing along with where I need to monitor my position for exit levels I will start searching for an option to trade.

One of the best approaches I like to use is to make sure I pick an option that has some “bang” to it.

Typically weekly options are one of the best ways to make sure you get that explosion in the options prices.

All of my Daily Deposit members received this email alert with the trade we were about to take!

 

 

Now let’s take a look at what happened right after I entered the trade…

 

Source: Thinkorswim

 

The market just tanked and sent my put options rocketing in value!

To make it easier to see how explosive options prices really are, here’s a chart of the massive gain in the options price charted directly.

Source: Thinkorswim

 

That’s exactly what momentum is all about!  

This trade set us up and gave us the chance to earn about a 100% gain in the options if we were able to time that market perfectly!

 

Wrapping up

 

This is really one of the most reliable momentum trading systems that can change the way you think of trading from here on.

It blows my mind that a system can be this consistent with timing these markets based on pre market analysis and momentum indicators.  

And why even bother having complicated options strategies when the only thing you need to do is buy calls and puts when the right setup shows itself in the morning.

So if you’re looking for one of the most simple ways to crush the markets during periods of high volatility like we are in now….

Click here to join Daily Deposits and get started today!

 

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

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1 Comments

  1. Thank you, looking at your service and sounds great , just out of work because of Corona Virus, Landon i will be on Jeff’s MoneyMultiplier Monday to start 49.00 sample week

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