Unleash the Power of Momentum Trading Strategy with Crazy Reliable Results

Table of Contents:

1. Introduction
2. Backtesting Results
   • Opening Range Breakout Strategy
   • Pre-market High Breaks Strategy
3. Analyzing Pre-market High Breaks
4. Timing of Pre-market High Breaks
5. Confirmation of Highs above Pre-market High
6. Silver Linings and Profitability
7. Finding Big Moving Stocks Early
8. Conclusion

Article:

Introduction

In today's video, we will be exploring the strategy of gapping stocks and the most effective way to approach pre-market high breaks. We will discuss the favorable times of the day to implement this strategy and how it can lead to profitable breakouts. We have conducted backtesting Sessions to analyze the accuracy of pre-market high breaks and determine the best time of the day to execute the strategy. So, let's dive into the details and discover the key insights from our testing.

Backtesting Results

Opening Range Breakout Strategy

Before delving into the specific strategy, let's review some other backtesting results that were conducted in the last few days. We tested the opening range breakout strategy, where we documented the high and low of the first three 5-minute candles and used a one-to-one reward-to-risk ratio for trading. However, after testing this strategy with over 40 stocks, it only yielded a 50% accuracy rate. Due to its random nature and low profitability, we decided not to pursue this strategy further.

Pre-market High Breaks Strategy

Now, let's move on to the main strategy of focus in this video, which is pre-market high breaks. In our previous backtesting videos, we discovered that only about a third of gapping penny stocks actually break the pre-market high. However, when they do, they tend to maintain a strong upward trend. This gave us valuable Insight into the potential profitability of trading these breakouts.

Analyzing Pre-market High Breaks

To further analyze the pre-market high breaks, we wanted to determine if the timing of the breakout played a significant role in its Momentum. We divided the testing period into two groups: stocks that broke the pre-market high in the first 15 minutes and stocks that broke it later in the morning. Surprisingly, we found that there was not much difference in the success rate between these two groups. Some stocks ran early in the morning, while others ran later, resulting in an almost even distribution.

Confirmation of Highs above Pre-market High

During the testing session, we started looking for confirmed highs above the pre-market high level to improve the accuracy of our trades. Instead of waiting for the actual pre-market high level to break, we observed that waiting for a confirmed level to break resulted in a higher percentage of successful trades. Out of our sample size, eight stocks exhibited this pattern, and six of them were successful, achieving a success rate of about 75%. This finding enhanced our confidence in this particular approach.

Silver Linings and Profitability

Although the majority of stocks do not break the pre-market high, there are several silver linings to this strategy. We observed that stocks which broke the pre-market high later in the afternoon tended to have a higher chance of sustained upward momentum. Even though we had only three instances of this during our testing, all three stocks performed exceptionally well and closed higher. Waiting for such opportunities could be a profitable approach, especially for those with limited day trades available per week.

Finding Big Moving Stocks Early

Many traders often ask how to identify big moving stocks before they happen. Through our backtesting, we have found that looking for the moving average crossover within the first 30 minutes of market open can help identify these potential opportunities. This strategy has shown great promise and has the potential to identify stocks that can deliver significant gains.

Conclusion

In conclusion, our backtesting sessions have provided valuable insights into the pre-market high break strategy. While most stocks do not break the pre-market high, there are profitable opportunities within this strategy. Timing, confirmation of highs, and the potential for sustained momentum in the afternoon have all shown promise. Additionally, looking for moving average crossovers early in the day can help identify big moving stocks. As always, it is essential to test each strategy before implementing it in live trading. Good luck in the markets!

Highlights

• Pre-market high breaks strategy can lead to profitable breakouts in gapping stocks.
• Only about one-third of gapping penny stocks actually break the pre-market high.
• Timing of pre-market high breaks does not significantly affect the success rate.
• Confirmation of highs above the pre-market high enhances the accuracy of trades.
• Stocks that break the pre-market high in the afternoon have a higher chance of sustaining upward momentum.
• Looking for moving average crossovers in the first 30 minutes can identify big moving stocks.

FAQ

Q: How accurate is the opening range breakout strategy? A: The opening range breakout strategy yielded only a 50% accuracy rate in our backtesting sessions, making it an unreliable strategy to pursue.

Q: Do stocks that break the pre-market high later in the day tend to perform better? A: Yes, stocks that break the pre-market high in the afternoon have a higher chance of maintaining upward momentum and can be profitable trading opportunities.

Q: How can I find big moving stocks before they happen? A: Looking for moving average crossovers within the first 30 minutes of market open can help identify potential big moving stocks.

Q: Are pre-market high breaks a guaranteed profitable strategy? A: While pre-market high breaks can be profitable, it is important to note that not all stocks break the pre-market high. Testing and analyzing each trade setup is crucial for success in day trading penny stocks.