As a new trader, you have to focus on the safest setups…
That means avoiding aggressive trades and lining up all the criteria before you trade.
And there’s one criterion I think gets overlooked all too often…
While traders put too much emphasis on criteria that don’t matter. Like stocks that are pumped…
Or they try to dissect news headlines.
Some of the best plays have simple criteria and indicators. That’s why I like to keep it simple…
Today I’ll share the criteria you’re probably overlooking the most, and how you can find trades that have this crucial puzzle piece…
The Crucial Criteria You Might Be Missing
Many traders overlook the importance of volume and liquidity in their trade ideas…
Maybe they’ll see a stock with a good chart and some news and automatically think it’s a trade.
But if the stock isn’t trading in unusual volume, the odds of it moving and paying you out on a trade are very low.
Supply and demand imbalances are what drive huge stock moves.
But what does unusual volume actually mean?
I like to look for stocks trading more than their 60-day average volume.
But I also like to look at volume relative to the float.
When a stock trades more shares in volume than are available in the float, you have float rotation.
That means new buyers are coming in and are willing to pay a higher price for the stock.
Look at Elevation Oncology, Inc. (NASDAQ: ELEV) as an example…
On Monday it went from around 87 cents to $2. It doesn’t have a tiny float, but 22 million shares is low-ish…
The stock didn’t even have any news that day … But what it did have was massive volume and float rotation.
It traded 47 million shares that day! That shows you buyers and demand are coming in.
ELEV chart: 6-month, daily candle — courtesy of StocksToTrade.com
You can see on the two-day chart how the volume came in when it broke the previous day’s high.
It traded the most volume in the morning and afternoon (the two most important times to trade), and it experienced the highest volume when breaking key levels.
ELEV chart: 2-day, 5-minute candle — courtesy of StocksToTrade.com
Watch this video to learn how to find stocks with lots of volume and liquidity before you trade the wrong stock tomorrow…
And attend one of our free training sessions to see more ways to find the hottest stocks in play and learn the key levels to trade them.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade