Lesson 28: 17 Killer Tips Every Momentum Trader Should Know

By T3 Live

When people hear the word “momentum,” they think excitement. Volatility. Big wins, and big losses.

But the reality is that the most successful momentum traders are highly disciplined.

To help you get better momentum trading results, we've put together a list of 17 handy rules that will keep you out of trouble:

1. Create a Game Plan and Stick To It

You should have a reason for entering each trade and always have a stop-loss price and a level to take profits before you enter a position. In the long-run, discipline is the key to consistent success.

2. Adapt to Changes Quickly

If a short-term trade isn’t working, don’t hesitate to switch sides. The market action can change very quickly, and you must be able to change with it. Don’t be stubborn!

3. Don’t get Married to Stocks

If you are losing money in a stock, you don’t have to make it back in that particularly stock. Likewise, don’t force a trade in a stock only because it has made you money before. Always trade the best set-ups only.

4. Don't Try to Pick Tops and Bottoms

Trying to identify tops and bottoms will lose you money over the long run. The trend is your friend, so focus on that.

And when you find it, follow it. Don’t trade with a bias because you think something should or shouldn’t happen. Let the stock tell you what its next move will be.

5. Accept Losses As Part of the Game

Prepare yourself mentally and emotionally, because you will lose money at times.

It's part of the game, so there's no use in fighting it. Just try to keep your losses small, and don't be afraid to take a break if they're getting bigger.

6. Stay Confident and Positive

If you're not feeling confident about your strategies and execution, don't hesitate to step back from he market until your head is together.

7. Be consistent with Your Game Plan, Size and Execution.

Keep your tier and trade sizes consistent and stick to your game-planned trades. You don't want to end up with $1,000 gains and $5,000 losses!

8. The First Stop Is the Cheapest Stop

Do not give into the temptation to let a losing stock run. Most of the time, you will end up getting destroyed because your small loss will turn into a huge loss.

9. When You are Wrong, Admit It and Move On

Don’t waste time with a trade that is no longer compelling. Just move on to the next one.

10. Give Your Trade Time

If you believe in a trade, but you're just not getting movement, wait for it to play out.

11. Never Let a Winning Trade Turn Into a Losing One

If you see profits in a trade disappearing, don't be afraid to cash out. You can always get back in later.

12. Try to Capture the Full Move of a Trade

While it is important not to let winners turn to losers, you will make your largest profits from capturing larger moves. So you can give a little back if you're up big — but not too much.

13. Know Your Trade Type

Always be aware of the type of trade you are in and act accordingly. Don't mix up your time frames and don't mix up your stock types. If you are in a swing trade, don’t get out impulsively on the first tick against you. If you're in a fast scalping situation, don’t get tempted to hang on too long.  And if you're in a slower-moving stock, be patient.

14. It's Okay to Take the Money and Run

If you have a highly profitable morning session, it's okay to take the afternoon off and relax, especially if you start giving some back. Don’t turn a great morning into a losing day. And if you have a bad morning and make it back to flat or a little green, call it a day and declare victory! If you push it, you risk suffering the emotional roller coaster of going from red to green back to red.

15. Trade the Same Way Whether You Are Up or Down

Traders tend to press hard when they are down, and they get careless when they are up. You should have the same disciplined approach in either situation.

16. Trade Stocks That Are in Play

Don’t trade something just to trade it. Make sure the stock you're eyeing have regular movement, or have catalysts for movement coming.

17. Learn a Proven Method

There are many ways to learn to trade, but too many traders take random pieces of information from different sources, and put them together without a plan for success.

The best way to learn to make money trading is to study a proven strategy, and then carefully apply it in real-world market conditions.