mid-morning, 150mid-range rule, 149negative market, 146neutral market, 146NOW market, 139controlling trades, 145disappearing gaps, 143online traders, 144positive gaps prior to open, 143unrealistic exits, 142online traders, 137pace of trading, 150playing consistency, 141potential runners, 147pre-market views, 156profit-taking territory, 139second-day gainers, 146sector strength, 152strong market, 141technology stocks, 138tracking sheets, 173–174undercurrent, 139value buying territory, 139WAS market, 139–140weak market, 141Market Makers, 37ax of stocks, 199–201masking trading intentions, 198–199
Trading on Momentum
Nasdaq, 3non-execution of SOES orders, 36SNET PREF orders, 39support in stocks, 201market open, funnel effect, 181–182market ordersARCA, 43online brokers, 33SOES, 36market specialists, 2mass psychologydecision-making, 55technical analysis momentum, 58maximizing profits, onlinetrader momentum, 61MBTrading.com, 34mental stops, 204–205mentality of trading, 21–22mentors, momentum traders, 11mergers, affect on earnings, 155methods, momentum traders, 12, 15micro-momentum, marketdynamics, 155micro view, tape reading, 194mid-morning market dynamics, 150mid-range rule, 149mirroring overall market direction,indicator stocks, 129misinformation and online trading, 16Moderators, trading chat rooms, 20momentumdwindling, 141institutional, 55–57micro level, 155movement, 146pace of trading, 148new market, 53news generated, 114predictable, 73slowing, 197time, 146momentum investing, 231–236,242, 247
Index
269
bargains, 237bear markets, 243closing combinations, 251–252identifying strongest stock, 243investment exits, 247–248law of participation, 238long-term bias, 235long-term investments, 245lopsided investing cycles, 240market influences, 241news events, 244participators, 235pre-market gaps, 249–250principles, 233sector momentum, 245–246time and movementprinciple, 233tracking market, 241momentum traders, 5advanced tools, 44business plans, 24capital preservation, 10charting software, 50discipline, 10education, 9–10goals, 12learning curve, 25Level 1 screen, 44–46Level 2 screen, 47–48losses, 26–27mentors, 11methods, 12, 15news services, 50on-site training, 12online discussions, 13online teaching forums, 13–15reviewing current financialsituation, 24risk capital, 25money management, 210–211movementmomentum, 146pace of trading, 148
moving averages, 58MSFT (Microsoft Corp), 2Mtrader.com, 11MZON (Multiple Zones), 70
NNasdaq (National Association ofSecurities Dealers AutomatedQuotation), 2ECNs (Electronic CommunicationsNetworks), 4–5liquidity, 3Market Makers, 3momentum traders, 5National Market, 4Order Handling Rules, 3OTCBB (OTC Bulletin Board), 4SmallCap Market, 4SOES (Small Orders ExecutionSystem), 3stock symbols, 5negative markets, 146Net Change from the Previous Day’sClosing Price, Level 1 screens, 46neutral markets, 146new market momentum, greed andfear, 53–54news alerts, 17chat rooms, 117fast momentum trades, 85–89news eventsindicator stocks, 126inventions, 155mergers/acquisitions, 155momentum investing, 244pacts and deals, 155news-generated momentum, 114news patterns, 92, 113–116news services, 44, 50next-day trading, trackingsheets, 174
270
niche patterns, gainers, 91–93basic elements, 96–99Chinese stocks, 94dumper patterns, 106–110end-of-day dumper gappatterns, 112end-of-day gainer gappatterns, 111–112first-day gainers, 104fuel cell stocks, 95genomics stocks, 95Internet stocks, 94Linux-oriented stocks, 94news patterns, 113–116Pokemon-related stocks, 94runners, 104second-day gainers, 105tracking journals, 101–102trades, 103NOVL (Novell), 77NOW marketfirst-day gainers, 146market dynamicscontrolling trades, 145disappearing gaps, 143online traders, 144positive gaps prior to open, 143reflecting WAS undercurrent, 139unrealistic exits, 142second-day gainers, 146NTRD (NexTrade), 5number theory, 184–185NYSE (New York Stock Exchange)market specialists, 2stock symbols, 5
Oon-site training, momentumtraders, 12one-minute bar charts, halfhour interval data, 165
Trading on Momentum
ONIS (ONI Systems), 83online brokersassets, 67buy options, 32disadvantages to active traders, 32market orders, 33online discussions, momentumtraders, 13online teaching forums, momentumtraders, 13–15online traders, 6–7active, 68affects on stocks, 68attitude, 224–229business plans, 24changing with market, 225dumb money, 63expectations, 24hype, 16–19increasing momentum, 138informed money, 63Internet stocks, 138knowing when to enter/exitmarket, 228learning curve, 25losses, 26–27market dynamics, 137momentum, 58market research data, 59maximizing profits, 61overvaluations, 62quick profits, 59news alerts, 17NOWmarket, 144paper trading, 27–28passive, 68re-evaluation, 228reviewing current financialsituation, 24risk capital, 25room leaders, 16
Index
271
smart money, 63small shares, live trading, 29–30Open column, Level 1 screen, 47open of market. See market open.open prices, tracking sheets, 165opportunities for trading, tapereading, 189–194Order Handling Rules, Nasdaq, 3–5order routing methodsARCA, 42ECNs, 40INCA, 41ISLD, 42SNET, 38SOES, 36origins of stock market, 1oscillations, 196–197OTC securities (Over The Counter), 3OTCBB (OTC Bulletin Board),Nasdaq, 4overnight gaps, Golden Rules ofTrading, 219overreactions, earnings season, 147overvaluations, online tradermomentum, 62
Ppace of tradingmarket dynamics, 150momentum movement, 148panic selling, tape reading, 196–197paper trading, 27–28, 216partial fill orders, 39–41participators, momentuminvesting, 235passive online traders, 68patterns to avoid, 118–120Percentage Change from the PreviousDay’s Closing Price, Level 1screen, 46
personal accountability, 221–223personal trading responsibility,Golden Rules of Trading, 219pink sheets, 118playing consistency, 141Pokemon-related stocks, gainers, 94positive news, gainers, 96posting orders anonymously, 40posting real-time trade entries, 24potential, upside/downside, 122potential runners, marketdynamics, 147pre-earnings season, earningswarnings, 147pre-market stock views, 156pre-market trading, 99, 186pre-market volume, gainers, 96preceding market day’saction, 139predictability, 127predictable momentum, 73competition mentality, 80–82herd mentality, 73–74predictable trade volume, 77–79price action, 77volume and pace, 76–77volume as function of, 74–76predictable patterns, 91gainers, 93basic elements, 96–99Chinese stocks, 94fuel cell stocks, 95genomics stocks, 95Internet stocks, 94Linux-oriented stocks, 94Pokemon-related stocks, 94niche patterns, 91–92pre-market gaps, momentuminvesting, 249–250price action, predictablemomentum, 77price gaps, gainers, 97
Trading on Momentum
272
price spike, tape reading, 196principles of momentuminvesting, 233profit, taking when available, GoldenRules of Trading, 217profit-taking territory, marketdynamics, 139
QQ, bankruptcy proceedings symbol, 5QCOM (Qualcomm), 9quick profits, online tradermomentum, 59
RRealityTrader.com, 11REDI (Spear, Leeds & Kellogg), 5regional market-making firms, 4retail market-making firms, 3riding selling pressure, WASmarket, 140risk capital, online traders, 25RoadRunner, online tradingcable access, 7room leaders, online trading, 16routing ordersARCA, 42ECNs, 40INCA, 41ISLD, 42SNET, 38SOES, 36rules of traders, 203money management, 210–211stop loss discipline, 204–206trailing stops, 207–208runners, gainer patterns, 104Russell 2000, 2
SS & P 500 (Standard & Poor), 2scenarios, market dynamics, 157–161Schwab, 31–32SEC (Securities and ExchangeCommission), 3second-day dumpers, tracking sheets,169, 172second-day gainers, 93, 104, 146gainer patterns, 105tracking sheets, 166–168, 174trading on expectations, 172sector momentummomentum investing, 245–246tracking sheets, 173sector rotation, institutionalmomentum, 56sector strength, marketdynamics, 152Securities and Exchange Commission.See SEC.selecting indicator stocks, 130SelectNet (SNET)disadvantages, 40order routing methods, 38SNET BROD orders, 38SNET PREF order, 39short-term bottoms, 120short-term direction of market,indicator stocks, 128short-term tops, 120shorting stocks, SOES, 37slow-drifting stocks, 198slow-momentum trades, 83slow stocks, 200slowing momentum, 197SmallCap Market, Nasdaq, 4small shares, live trading, 29–30smart money, profiting from dumbmoney, 63–65smart routes, ARCA, 43SNET. See SelectNet.
Index
273
SOES (Small Orders ExecutionSystem), 3, 34ECN non-eligibility, 41fast-moving stocks, 37inside Ask, 39limit orders, 36market orders, 36non-executability of ECNs, 36order routing methods, 36shorting stocks, 37stock eligibility, 36tier sizes, 36trading IPOs, 37speed of tradestraditional brokerages, 31Web-based brokerages, 32stock gaps, tracking sheets, 165, 173stock halts, 106, 120stock market origins, 1stock report newsletters, onlinetraders’ affect on stock, 68stock split anticipation trades,avoiding, 118stock splits, avoiding, 119stock ticker symbol, Level 1 screen, 44stocksactions, tracking sheets, 166drifting, 198eligibility, SOES, 36float, 69pre-market views, 156setups, paper trading, 27–28shorting, 37symbols, 5stop losses, 150discipline, 204–206Golden Rules of Trading, 218stops, tracking sheets, 168strategy planning, 226STRK (Strike Technologies), 5strong markets, 141SuperDot system, 34
SuperSOES, decreased timeconstraint, 37SureTrade, 32symbols for stocks, 5
Ttaking profit when available, 217tape readingidentifying tradingopportunities, 190macro view, 191–192Market Makers, maskingtrading intentions, 198–199micro view, 194panic selling, 196–197price spike, 196technical analysis momentum, 58technology stocks, 138theme momentum, 70–71tick rules, shorting, 37Ticker, 190Ticker symbol, Level 1 screen, 44ticks. See down-ticks, up-ticks.time, momentum, 146time and movementprinciple, 233Time and Sales window, 190Time of Sales Ticker, 44, 47–48top of oscillation, 196–197tops, short term, 120tracking diaries. See tracking sheets.tracking journals, gainerpatterns, 101–102tracking market mood, 241tracking sheets, 163–164analyzing data, 167bounces, 168close prices, 165expectationssecond-day gainers, 172trading on, 170–171
Trading on Momentum
274
first-day dumpers, 166, 169, 172first-day gainers, 166–167first up-ticks, 167futures heading, 164gaps of stocks, 165half-hour interval data, 165market dynamics, 173–174noting stock action, 166open prices, 165second-day dumpers, 169, 172second-day gainers, 166–168stops, 168tracking summaries, 175trader accountability, 221–223tradesafter-hours, 187gainer patterns, 103pre-market, 186times, writing down, 218trading attitude, 224–229trading chat rooms, moderators, 20trading expectations, 24trading mentality, 21–22trading on expectations, 170–171trading on paper, 216trading online. See online trading.trading opportunities, tapereading, 189–190macro view, 192–193micro view, 194trading rules, 203money management, 210–211stop loss discipline, 204–206trailing stops, 207–208trading the rule, not the exception,Golden Rules of Trading, 213traditional brokerages, speed oftrades, 31trailing stops, 207–208transports, 1trends, 132turning profit into loss, fast stocks, 180
UU.S. Securities and ExchangeCommission, 2UK (Union Carbide), 2undercurrent, 139unrealistic exits, NOW market, 142up-ticks, 184upside potential, 122utilities, 1
Vvalue buying territory, marketdynamics, 139volatile stocks, 156volumeas function of predictability, 74–76pace, predictable momentum, 76–77Volume column, Level 1 screen, 46
W–YWAS marketmarket dynamics, 139playing consistency, 141riding selling pressure, 140weak markets, 141Web-based brokerages, speed oftrades, 31–32whole number theory, 184–185wholesale market-making firms, 4Wilshire 5000 Total Market, 2writing down trade times, GoldenRules of Trading, 218XYBR (Xybernaut), 70YHOO (Yahoo ), 9
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