Here at stockhaven.com this is required reading for all of our members. Since we work as a group to find stocks in our live chat room, there are often multiple members playing the same stock. If everyone knows how to sell and follows the rules of trading momentum, the better the chances that the momentum will continue and other members can take profits as well.
Are you a Momo Killer?
Here’s the scene: You’ve just bought a hot momentum (momo) runner at .003. News out 10-minutes ago. The ask is falling, one market maker left. BOOOOM. .0031 x .0035, bids stacking. This one looks like it’s going higher. Oh $##% someone just whacked the bids… .0021 x .0028. Wow what an idiot.
Have you seen this happen before? Chances are you have, and you’ve been a victim of a Momo Killer.
Sell on the ask
This is the number one rule of intraday penny stock trading. If you take anything from this article, remember this: Selling on the ask keeps the momentum going. I’m sure you’ve seen it before, when a stock gets “whacked” (sold on the bid) it can often create a flurry of other panic sellers pushing the price down. One seller, no matter how small, can easily start a panic sell-off or unnecessary dip. If you sell on the bid you are a momentum killer.
Downticking Ask during imminent breakout
Another momentum killing technique is down-ticking the ask. The only time you should be down-ticking the ask is if there’s a big spread. When a stock looks ready to breakout one of the best ways to deter new buyers is to bring the ask down.
Example: Stock high: .05 (breakout point) Your sell: .0499 When a steady stream of hits is going through at .05 (the high) there’s no reason you should be down-ticking the ask and creating fear. If you have a small position, try an AON (all-or-none) order or sell on the ask at .05 via a limit order. Traders, especially breakout traders, are more likely to hit an ask of .05 than an ask of .0499.
Selling Large Blocks
Depending on how many shares you have to sell, putting a large block up for sale on the ask is not a good idea. First off, this is a bad way to sell a full position – a large block that is not easy to get through will often scare other short term shareholders out of their shares. This doesn’t bode well for your position. If you had sold smaller blocks on the ask, chances are you would be able to liquidate your position with little to no impact on the price which also translates into getting a better price average for your sell. If you must sell a large block, the best way to sell is at round breakout points (e.g. .01 .02 .03) where there is more liquidity.
These are the top ways to kill the momo. Don’t be a momo killer, make sure you follow these rules to keep momentum plays alive!
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