Ideally after 9:45 a.m. Here's how the dip and rip works:
Set-Up: The stock initially experiences a spike to a new high before the market opens.
Dip: Right near the market opens, the stock dips significantly from its peak.
Rip: After the dip, the stock starts to regain strength and moves back toward its high of the day.
Entry: Look for the stock to break above the high of the day on high volume, signaling a potential entry point.
Risk and Reward: Set your risk at a significant level on the chart, and aim for a profit that outweighs your risk. I like to shoot for a 3:1 risk/reward.
This is one of the top patterns I recommend for trading the morning action.
Pattern 2: Late Day
Focusing on the mornings and afternoons can cut out a lot of losing trades midday. Since that's when there can be lower volume and more choppy price action.
The Late Day pattern is one that occurs in the afternoon. Here's how it works:
Spike and Consolidation: The stock experiences a spike earlier in the day and then consolidates around the VWAP (Volume-Weighted Average Price).
New High of the Day: At around 2 PM, the stock breaks above the morning's high on high volume, indicating a potential entry opportunity.
Entry and Risk: Enter the trade as the stock makes a new high of the day, and set your risk level based on the VWAP fail.
Position Sizing: Sometimes VWAP can be quite a bit lower than the high of the day in some of these volatile movers. So make sure you adjust your position size accordingly based on your max risk.
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*Please note that these kinds of trading results are not typical. Most traders lose money. It takes years of dedication, hard work, and discipline to learn how to trade, and individual results will vary. Trading is inherently risky. Before making any trades, remember to do your due diligence and never risk more than you can afford to lose.
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