StocksToTrade - Trending Morning Pattern You Need to Know
The morning fader pattern is highlighted as a reliable strategy for trading volatile stocks, particularly for new traders. It helps avoid impulsive decisions in pre-market trading, which can be risky. The speaker emphasizes the importance of sticking to a stop loss and having a trade plan. The example of PHIO is used to illustrate the pattern's effectiveness, showing how it was a former runner with a significant press release that led to a 100% move. The speaker explains the importance of float rotation and how it can indicate potential big movers. The Oracle tool is recommended for identifying entry signals, which simplifies the trading process by providing clear buy signals without the need for technical analysis. The video stresses the importance of risk management, position sizing, and having a clear trade plan to maximize profits and minimize losses.
Key Points:
- Morning fader pattern helps avoid impulsive pre-market trading decisions.
- Stick to a stop loss and have a clear trade plan for better risk management.
- Use Oracle to identify entry signals and simplify trading decisions.
- Monitor float rotation to identify potential big movers.
- Focus on former runners and news-driven stocks for trading opportunities.
Details:
1. 📉 Introduction to Morning Fader Pattern
- The morning fader pattern is currently one of the most popular trading patterns due to its potential for significant profits when applied correctly.
- Key characteristics of the morning fader pattern include a strong initial upward movement in the stock price during pre-market, followed by a gradual fade or decline once the market opens.
- New traders should focus on understanding the volatility associated with such patterns and avoid impulsive decisions, particularly during pre-market trading hours.
- Effective risk management through a disciplined stop-loss strategy is crucial for trading in pre-market sessions, given the increased risk of sudden price movements.
- Trading in pre-market can be beneficial if traders have a solid plan, including identifying the right entry and exit points and managing stop losses effectively.
- The morning fader pattern addresses common issues in pre-market trading, such as chasing a move that results in losses, by providing a structured approach to capitalize on initial price movements.
2. ⏰ Pre-Market Trading Pitfalls and Strategies
- Many traders make the mistake of chasing stocks during early pre-market hours, hoping that news or events will recover their losses.
- Holding onto losing stocks in anticipation of news or market movements can lead to further losses.
- To avoid this pitfall, refrain from trading if your sole strategy is waiting for news events to reverse losing positions.
- Focus on proven strategies like trading morning faders, which are considered one of the most effective setups in pre-market trading.
3. 🚀 PHIO: Understanding the Former Runner Phenomenon
- Former runners are stocks with a history of significant price increases that often repeat those patterns. Identifying these stocks requires daily market engagement and data tracking.
- PHIO was identified as a top stock due to its history as a former runner and a new press release that generated market excitement.
- The press release at 7:45 a.m. highlighted developments in gene technology and subcutaneous squamous cell carcinoma, using buzzwords that typically stimulate interest. However, PHIO is still considered a penny stock with limited long-term success potential.
- The strategy for day trading involves capitalizing on the immediate excitement created by such announcements, rather than focusing on long-term viability. Traders should remain cautious of the potential risks associated with the volatility of penny stocks like PHIO.
4. 📊 Decoding Key Trade Indicators
- The stock demonstrated a significant 15x float rotation, with 30 million shares traded against a float of a couple of million, signaling potential for substantial movement.
- High float rotation is a strong indicator that a stock is likely to be a major mover, making it a focal point for traders to watch closely.
- On the initial press release, 5 million shares were traded, which surged to 27 million shares as the market opened.
- A morning fader pattern was observed, characterized by a steady price decrease from 8:30 to 9:00 a.m., which is often exploited by short sellers.
- Low-float stocks that exhibit fading action generally attract short sellers who anticipate a price collapse at the market open.
- Understanding float rotation helps traders assess stock volatility and identify high-potential trading opportunities.
- Traders can capitalize on the morning fader pattern by timing their short positions to coincide with expected price declines.
5. 🔔 Leveraging Oracle for Optimal Trade Signals
- Oracle signals provide a competitive edge in trading by swiftly identifying priority stocks, as seen in the morning fader strategy where a stock's failure to drop at market open signaled an opportunity.
- Oracle's algorithm-generated signals are received almost instantaneously, such as the signal received at 9:31 a.m. and relayed to traders by 9:33 a.m., underscoring the importance of rapid response to signals.
- Traders can adopt Oracle signals to enhance decision-making without requiring deep technical analysis expertise, thus broadening accessibility to effective trading strategies.
- A specific strategy involved setting a stop loss at $4.39, with a subsequent buy signal at 4.71 soon after market open, demonstrating the precision of Oracle signals in guiding entry and exit points.
- Employing a three-to-one risk-reward ratio is recommended for optimizing stop losses and profit targets, which has reportedly led to immediate profitability in trades using Oracle signals.
6. ✅ Mastering Risk Management and Trade Strategy
- The stock price surged from 4.71 to a high of 9.79, exemplifying a significant price movement that traders capitalized on.
- Traders showed varying risk tolerances, with most selling between 5 to 6 and others holding until the price reached the 8s.
- This trade offered a risk of 32 cents per share with a potential upside of nearly $5, illustrating a strong risk-to-reward ratio.
- Successful strategies prioritize maximizing upside and minimizing downside, as demonstrated by the 32 cents risk per share versus the $5 potential gain.
- Using tools like the 'Oracle,' traders can limit losses to small amounts, such as 30 cents per share, when trades do not perform as expected.
- Predetermined risk per trade is crucial for effective position sizing and maintaining disciplined risk management.
- The 'Daily Income Trader System' educates traders on managing risk, optimizing entry and exit points, and identifying profitable patterns such as the 'morning fader.'
- A 'box checking philosophy' is employed to identify stocks with low float, news catalysts, and a history of strong performance, ensuring informed trading decisions.
7. 🗓️ Daily Income Trader System Insights and Wrap-Up
- Hundreds of traders successfully leveraged the Daily Income Trader System to achieve significant returns on stocks like PHIO.
- The system offers real-time webinars that map out trading strategies, allowing traders to capitalize on market movements effectively.
- The system provides daily insights and guidance twice a day, ensuring consistent support for traders.
- The creator of the system has maintained a daily presence for 10 years, indicating long-term commitment and reliability.
- A free signup is available for interested individuals to join webinars and explore the system's offerings.