We built the momentum scanner to help bring you the highest probability of short-term momentum trades as easily as possible. The scanner is built on the principles Wall St Jesus has used to trade momentum from option flow for many years.
Why Does This Type of Flow Create Momentum?
Market makers and dealers need to hedge.
Picked up on “unusual options scanners.”
Potential new or looming news headlines.
How long can the momentum last?
The duration of momentum is highly variable and can range from minutes to days, or even extend for weeks.
Our main objective is to secure a favorable entry point, allowing us to quickly adjust our stops to break even
If a stock experiences persistent order sweeps, it can sustain momentum throughout the entire trading day.
If the momentum in options contracts diminishes, we should not anticipate a continuation of momentum in the underlying asset.
Here are a couple of ways our traders may trade signals from the scanner.
Basic Sequence of Events for All Strategies.
Identify Momentum on the Scanner: Begin by scanning for stocks or assets showing strong momentum.
Analyze "The Spot": Examine where the momentum flow is coming in on the chart of the underlying asset; this step is crucial.
Select an Entry Point: Choose a specific level or area where you want to enter the trade.
Choose Your Trading Instrument: Decide whether to use equity or opt for ATM (At The Money) weekly options, aligning them with the same strike price as those being swept.
Implement a Stop Loss: Establish a stop loss, which can be either a mental stop or a hard stop, to manage risk.
Adjust Stop to Break-Even: Once the trade shows a favorable cushion, consider moving your stop to the entry point to lock in your initial investment.
Trail the Stop: If momentum persists, adjust the stop higher or lower to ride the momentum while protecting profits.
Take Profit at Target Levels: Execute your exit strategy when predetermined profit targets or levels are reached.
Implement Price and Time Stops: Remember that intraday momentum trades should include both a price stop and a time stop to manage risk.
Stay Agile: If the expected momentum doesn't materialize, exit the trade promptly and be ready to move on to the next opportunity.
Aggressive Strategy
Entry: At ref price or better.
Size: In units divisible by 3.
Stop Loss: -1% from from your entry.
Primary Target: +1% and 2% from your entry.
Secondary Target (optional): +2% from your entry.
Possible Management:
Adjust Stop Loss to Break Even: When the stock price reaches 75% of our target, it's time to move our stop loss to break even or the cost of entry.
Partial Position Exit: At a profit of +1% from entry, take off two-thirds (2/3) of the position.
Final Position Exit: Once the remaining one-third (1/3) of the position reaches a +2% profit from entry, exit that portion as well.
Stop Loss for Loss Protection: Execute your stop loss at -1% from the entry point to minimize potential losses.
Reacting to Price Movement: If the stock price initially moves against our position and later recovers, consider exiting at break-even or moving the stop to the entry cost to protect capital.
Monitoring Signals: If the trading signals transition from "active signals" to "past signals," it's advisable to consider using a "time stop" and exit the position.
Conservative Strategy
Entry: At VWAP/AVWAP or nearest 1 min support/resistance level.
Size: Any size that represents less than XX % of your account.
Stop Loss: -1% from from your entry.
Target: +1% from your entry.
Possible Management:
Adjust Stop Loss: When the stock price reaches 75% of our target, promptly move our stop loss to the entry cost to safeguard against losses.
Profit Taking: Take the entire position off if it reaches a +1% profit from the entry point.
Stop Loss for Protection: To manage risk, exit the entire position if it reaches a -1% loss from the entry point.
Reacting to Price Movement: If the stock price temporarily moves against our position but then recovers, contemplate either exiting at break-even or adjusting the stop to the entry cost to protect capital.
Monitoring Signals: If the trading signals transition from "active signals" to "past signals," consider implementing a "time stop" and exit the position.
Can I trade with Options?
The short answer is yes.
However, if you are new to options trading or momentum trades, we recommend you start with equities.
Once you are familiar with the process and you have seen other members trade the same setups with options, it is up to you to use options.
Can I trade this strategy with a small account (PDT)?
Yes, here are a few ways to do so:
You trade a cash account with no margin.
You are selective about the trades you enter and keep below the PDT allotted numbers of trades in a week.
Questions or suggestions?
Please reach out if you have any further questions or suggestions.
See Also: