Trading the Strategy of the Day

After the market meltdown Wall Street is putting itself back together. The market has had a nice run. It has momentum, they say. When there is a disaster everyone looks around for a new strategy of the day. One strategy of the day is the focus on momentum. Whether momentum investing is indeed the strategy of the day is not the trader’s concern. However, scalping is. Putting yourself in the shoes of the investor who looks for “momentum” stocks will put you in place to make some nice profits scalping when the stocks in question move.

Long term investors are looking for a new Gospel. What can one do to put one’s money to work? After the market collapse many investors are looking for a new “guarantee” of profits. Every fund manager, brokerage house, and pundit is promoting their new strategy of the day. Every strategy of the day cannot be right and every strategy of the day cannot be wrong. So, from the trader’s viewpoint where is there money to be made?

Momentum stocks, sectors of the market that display momentum, whether that momentum is going up or down, are good places to be for the trader. If a stock has “momentum” and lots of trading volume, scalping is a good idea. However, you need to be there when things move and you need to be in the stock or market sector where the momentum is.

We have talked about stocks that might benefit from stimulus money and “green stocks” that will benefit from a new focus on clean energy. It is not too late to pay attention to these ideas, do a little homework, and catch the momentum for a little scalping.

The nice thing about scalping is that you can do it in both directions. When the strategy of the day works and a stock goes up or when the strategy of the day fails and a stock goes down scalping can make you money if you are there and ready.

In athletics coaches talk about cross training. A sprinter will practice a little at middle distances and a long distance runner will practice sprints. Some of this has to do with physiology and some has to do with mindset. Often a sprinter will toughen up with longer runs and a long distance runner will improve his final sprint with cross training. Likewise, traders can use a little cross training. Putting yourself in the shoes of the long term investor who was burned last year is a good idea. Looking for new solutions for investing is a good idea. Then use the insights that you gain in your trading. Anticipate the market. Be aware of each current investment strategy of the day and be ready to trade when the strategy of the day provokes a market move.

Then enjoy your scalping profits while you investigate the next strategy of the day.

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