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The Pros and Cons of Trading Momentum Stocks - YouTube
Channel: StocksToTrade
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- Today we're gonna talk
about momentum stocks,
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what they are and why you should care.
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I mean, listen, you're
trading with a small account
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or in my opinion, a medium
or even a large account.
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This is where it's at
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boring sideways stocks are the worst.
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I'd rather have like a dripping faucet.
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When I was trying to sleep
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than trade sideways stocks.
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We love momentum stocks,
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today we're gonna talk about them.
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(upbeat music)
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Hey everyone
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Lead Trainer with
StocksToTrade Tim Bowen here.
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Sure to like, subscribe and
ring that bell to be notified
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as soon as we go live.
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We do so much on this channel
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really proud of it.
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How to videos like this,
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long form podcast, the
short twist podcast,
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Brace is doing kind of
the funny irreverent
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SteadyTrade treats.
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I go live every day.
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I mean, it's pretty
wild here a few years in
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three, four years in.
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The amount of stuff we put
on the YouTube channel,
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really proud of it.
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Ring that bell, subscribe,
share with your friends
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and also check out the SteadyTrade Team.
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It's a mentorship program
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where I've done over 2,500 webinars.
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I think it's the best way to
learn how to run these scans,
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learn how to spot these patterns,
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learn how to really master this niche.
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Click that link
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and I look forward to working
with you in a small group.
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All right, momentum stocks,
what are momentum stocks?
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Why do we care?
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What are some of the drawbacks, et cetera?
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So, I mean, you can see a
great example from today, GTEC.
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This ultimately ended up
being a failed dip and rip
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but you can still see the potential.
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I mean, the news dropped
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at 7:00 AM and I mean look at this thing.
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I mean, you had to be quick,
you had to be really quick.
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But you see the potential
news drops at 7:00 AM.
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Stock goes from eight to as high as 27
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in pre-market, pulls back to view app
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and then spiked all the way
back up to 27 in pre-market.
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Again, I was looking at that dip and rip
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you can see it opened
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opened week, never bounced.
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But the beauty of the 9:45 rule,
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which if you guys know the 9:45 rule
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keeps you out of a lot of
trouble on these stocks.
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But I'm just getting at the potential.
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Here it is,
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this stocks basically at the
low of the day at 3:00 PM,
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it's still up a hundred percent.
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So, and bring up GTEC
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I'm recording on the middle of February,
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bring up GTEC wouldn't surprise me
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if this thing made another run.
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But that shows you the potential.
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And now let's talk about what to look for,
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why we care, et cetera.
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So ultimately with a momentum stock
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it can look like there's no top insight.
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I mean, that's what I
call that blue sky chart.
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And we love those blue sky charts
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because at the end of the day
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you'll hear bag holder bag
holder, bag holder charts.
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It's a term I use a lot
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you'll hear other people doing videos
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and they'll say, "oh
it's a bag holder chart."
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The idea behind a bag holder chart is,
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it's that longterm down trending chart
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that just has that weak bounce.
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And ultimately you've
got all of these people
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that are upside down.
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I mean, you've probably been there.
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I mean, we've all been there.
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Hopefully we learn from it.
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But you bought some stock,
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and it just red every day,
red every day red every day.
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And you hold and you hold and you hold,
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you quit opening your brokerage account
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coz you can't even bear to look at it.
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Then one day, six months
later, your buddy texts you.
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And he's like, "hey, you're bag
holder stocks up 30% today."
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Now you're still bleeding in the red,
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you're down 80%.
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But your buddy tells you
about that 30% bounce.
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And you're like, "hallelujah."
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You sell okay?
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That's what creates
that one and done chart,
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it's cause every bag holder
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is like, "thank goodness
I got a 30% bounce.
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"I didn't run my account
all the way to zero."
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What's great about stocks like GTEC,
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or these other 52 week breakouts.
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It's all blue sky above.
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That's why we love the IPO's.
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We love the SPACs,
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the special purpose acquisition companies.
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Coz most of the time
they're in hot sectors.
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I mean, that's the
perfect thing about IPO's.
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I mean, here's a tip,
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obviously if you're
taking your company public
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you're probably not watching my videos
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but just think about it.
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If you were gonna do an IPO,
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are you gonna do an IPO
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in a boring line of business
that no one cares about?
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No, you do your IPO,
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like in 2020 when electric
vehicles are going wild.
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Or you're doing a Bitcoin IPO
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or you're doing a coronavirus IPO.
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I mean you're going to time
your IPO around hot sectors.
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Then that stock opens up,
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you got all the mania, it's all blue sky.
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You've got no bag holders above,
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that's why we love IPO's
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we love SPACs and we love breakouts.
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I mean, even if the stock's been trading
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for 20 or 30 or 80 years.
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If it's at all time highs,
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nobody's red, nobody's red.
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So everybody's buying,
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it's like everybody's dancing
around the punch bowl.
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When you're at all time highs
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everybody's happy.
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Everybody's buying more.
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That's why breakouts work.
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So also institutions,
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when you've got these real
stocks that we talk about
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$50 stock, a hundred dollars stocks
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that have decent financials.
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A lot of these I'm talking
about aren't the penny stock
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the low float, the junk stocks.
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But right now in this market,
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even the higher price
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the quote unquote "real stocks move."
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And especially if they're profitable,
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they've got real products.
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You got retirement funds,
mutual funds, hedge funds
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retirement funds, et
cetera, pensions, et cetera
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adding to these companies creates buyers.
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The more buyers you have the better.
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So I already talked about the fact
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that most of the time
they're in hot sectors.
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Most of the time they're sympathy plays.
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I mean, right now Bitcoin
hit 52,000 last night.
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We had RIOT, MARA
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some of these most beat down stocks ever
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all at 52 week highs,
everyone's talking about them.
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And at the end of the day more buyers.
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Remember the stock market,
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and you'll hear me say
this on so many videos
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but the stock market is a market.
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Supply,
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in what rules markets.
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I don't care if you're
selling coffee or water
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or bananas or apples, more
buyers means higher potential
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for the price to go higher.
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Concert tickets great example.
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I mean, if it's a hot concert,
you aren't paying face value.
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You're not paying 50 bucks
for the latest hot concert.
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You might be paying 500,
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who knows day before the concert,
you might pay five grand.
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That's what we want.
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More buyers, more demand, et cetera.
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Now what are the downsides?
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I mean, at the end of the day
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these stocks are quote unquote "up a lot."
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Okay I mentioned RIOT,
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that was a stock for years and years.
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This is a four to $5 stock
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it hit 85 last night.
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So it's a double-edged sword.
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I went on and on about how everybody's
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in the green dancing
around the punch bowl,
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but at the same time,
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if you're that buyer that bought it four
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bought it five or bought
it 10 or bought it 20.
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And now you're at 80, 90.
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Maybe there's gonna be some profit taking.
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That's the beauty of having a plan okay?
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If you check out the SteadyTrade Team,
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you'll hear me say it
every single webinar.
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Your not trading,
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unless you have a stop loss
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based on the chart and a
goal based on the chart okay?
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So if you're trading with a plan
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with a clearly defined stop,
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then if the profit taking comes in,
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you stop out and you
move on to the next one.
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Small losses, big gains
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over time you're a
consistently profitable trader.
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One of the biggest drawbacks
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and I suffer from this terribly.
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I mean listen momentum stocks move fast,
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they move up fast
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they move down fast.
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And I spend more time at this
computer than I care to admit.
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Probably an unhealthy amount of time.
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Yeah I get up at 4:30 in the morning.
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I get some coffee,
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but usually I'm at this computer
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a little after five in the morning.
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And I take breaks, which you should too.
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But until that 4:00 PM close,
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I'm staring at this thing
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because I trade some of
the most volatile stocks.
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And that's 11 hours a day
staring at this computer.
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I don't know how healthy that is
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I'm almost 50 now
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I haven't dropped dead yet,
but that is a drawback.
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If you've got a job, you've got kids,
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If you've got commitment, it's
tough to leave the computer.
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That definitely is a drawback.
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And then ultimately at sometime
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when that air comes out,
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this kind of dovetails to last point.
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When the air comes about,
they tend to fall fast.
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And if you can't take that loss,
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I mean taking losses is discipline.
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That's why so many newer traders fail.
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They haven't built up the
discipline to take that loss okay?
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And if you haven't built
that discipline bone,
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check out Jocko Willink,
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watch the Jocko podcast
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If you need to build
your discipline for free.
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(laughs)
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But if you haven't built that discipline,
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when they start pulling back
and they blow through your stop
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and you start justifying and
you start adding new a loser
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it can get ugly real fast.
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So that's the biggest drawback
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is that yeah stare at them all day,
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and if you don't have the
discipline to stick to your plan
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it could get ugly fast.
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All right.
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I hate to finish on a kind of a dour note,
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but I mean ultimately what I
try and do with the podcast,
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what I try and do with these videos
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is I want your eyes wide open.
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Listen, market's wild
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so much going on so much
opportunity out there.
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But go in knowing what the risks are,
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knowing what can,
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what can bad can happen.
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I mean, think about a battle plan,
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or a fight.
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I mean the famous Mike Tyson quote
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"everyone has a plan until
they get punched in the face."
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Okay you gotta have a plan
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if that right cross hits you okay?
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Cause if you start
freaking out and losing it,
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it's gonna get ugly.
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It's gonna go to the mat
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and it's gonna get ugly real fast.
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So have a plan,
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learn that discipline
and go in eyes wide open.
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But that being said,
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I mean GTEC is such a great example.
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Eight to 27 in 10 minutes.
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That's the potential in these type moves.
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All right everyone have a great day.
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Check out the other archive of videos
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If anything went over your head
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we've got hundreds of
videos, blog posts, podcasts.
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And ultimately if you're really ready
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to take that next step,
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check out the SteadyTrade Team
and I'll see you next time.
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