There’s a ton of trading patterns out there…
I can’t stop talking about it but the morning fader setup keeps showing up every single day.
As I said yesterday morning during my Premarket Prep, it’s been happening for over two weeks now!
I even wrote a blog post about it last week.
One of my jobs as a trainer and mentor is to introduce new students to the world of trading,…
Whether you’re day trading or swing trading, part of my commitment is to help you get started slowly and safely.
I don’t want you to dive in headfirst, trade too aggressively, and lose everything before you really have a chance to get started…
You have to keep it simple, focus on a few patterns, and practice them repeatedly before moving on to more sophisticated setups.
Every once in a while, I like to review trading patterns for brand-new traders, and that’s what I’m going to do today.
In fact, I consider this one of the number one patterns you should be locking in on as a new trader.
Table of Contents
The Morning Panic Dip Buy: The Perfect Strategy for New Traders
The setup I want to discuss today is the morning panic dip buy. It’s one of the most repeatable and consistent patterns out there, especially if you’re new and especially if you’re trading with a small account.
This setup has been around for as long as I’ve been trading. It’s a favorite of mine, and you’ll hear traders mention it often.
Now, please don’t confuse this with the “dip and rip.”These are two very different and, in fact, opposite setups.
The dip and rip is about buying into strength, while the morning panic dip buy is about buying into weakness.
How to Find It
So, what are we looking for in the morning panic dip buy?
We’re on the lookout for a stock that has had multiple gap-ups, big cracks, and bounces.
This is the perfect candidate for a morning panic dip buy.
The stock typically has a history of grinding higher, dropping big, bouncing, and then fading late in the day.
So when does the panic come?
When a stock gaps up and closes at or near the highs multiple days in a row, the buyers eventually get exhausted.
And bam!
That’s when we see the panic—a sharp, fast drop…
But, I must be clear here…
A panic is not a 5% drop, it’s not a 10% drop…
A true panic is a drop of 30, 40, 50% or more. The stock needs to drop that much for the opportunity to be ripe.
And now remember this…
Don’t jump in right away. You must wait for the stock to base and find solid support.
When I talk about solid support, I mean that you need to wait until the bid side outweighs the ask side. Combine that with a green five-minute candle on big volume and you’ve found support.
That’s when you make your entry. For your stop-loss level, always use the low of the day….
If the stock breaks that low, you’ve got to get out, because things can get ugly really fast.
Don’t Get Greedy
Once you’ve initiated your position, don’t get too excited…
As a new trader, you must remember to take singles and doubles. That’s how you grow your account over time. Take your profits, stick to your stop loss, manage your risk, and keep piling up those wins.
Another reason to settle for singles and doubles is that many of these morning panic plays are in OTC stocks, and OTC stocks can move very quickly. There’s a reason the panic exists in the first place!
My Final Thoughts…
These plays don’t come around every day, but when they do, they’re some of the best setups out there.
If you’re patient and prepared, you can find them.
There are many ways to prepare yourself if you’re new to trading…
First, tune in to one of our free live webinars here at StockstoTrade.
They run all day and offer trading tips and tricks, information about how we use our proprietary Oracle system and lots more.
Another way you can set yourself for success is by having the best trading platform out there. If you want to play the morning panic pattern and other setups, you’ll need a system that provides technical indicators, charting, and more.
StocksToTrade is the one I use every day.
It has dynamic charts, indicators and stock screening capabilities that traders like me look for in a platform. Best of all, if you’re a new trader, it provides a paper trading environment so you can practice your strategies beforehand without risking your own capital.
Grab your 14-day StocksToTrade trial today — it’s only $7!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
As a trader, do you want to be stuck on your laptop all day, every day?
I’m guessing the answer is no…
My colleague and seasoned trader, Tim Sykes, has developed an under-the-radar style of trading that will unglue you from your computer.
It all happens over the weekend when the markets are closed…
Tim has made thousands in profits from this strategy.