Momentum Trade On PLUS (The Why And The How)

I managed to trade PLUS twice due to its Momentum.

Let me share an insight on how I did it and why.

My first trade was on July 18. PLUS has been on a downtrend for almost two weeks prior to that. From 65 pesos (1.15 usd) down to 19 pesos (0.33 usd). There was a steady decline in its price when it was on a downtrend. There was no volatility. The price was just steadily decreasing. Sellers just overwhelmed buyers. There was just to much selling pressure. July 18 came and there was volatility on that day. The price did not just steadily decrease. It went up and down. It went down to 15 pesos at open then pushed back up to 20 pesos then down again to 16 pesos then up again. There was momentum. At the first hour of the market opening, PLUS set a range. The bottom was 15 and the top was 22. As soon as the range was established, I bought near the bottom. I sold near the top for the price was still going up and down. I closed my computer and called it a day that time.

For a few days, PLUS was on a steady climb. Buyers kept overwhelming sellers. The buying pressure was there. The price climb was steady. There was no volatility. There was no momentum. I stayed away from PLUS.

On the 1st of AUG, the price of PLUS went volatile again. It went up and down. It made a range of 28 pesos as top and 18 pesos as the bottom. It went up hard then it went down hard. On and on and on. There was volatility. There was momentum. I bought near the bottom of the range again and sold it above 25 pesos.

I made two very successful trade on PLUS.

I gave you and idea on how I traded it and why. Philippine market is illiquid. There is no liquidity. You seldom see volatility and momentum on a Philippine stock. Its so illiquid that when one stock managed to have momentum then almost everyone takes notice. Everyone joins in. That makes the stock price even more volatile. Everyone is hungry for that scalping or day trade.

When I talk about momentum and volatility, most traders misunderstood it as "explosive" or high volume. Momentum and volatility is the rate of the price change. It has very little to do with volume. There are volume-less volatility and volume-less momentum. Think about a stock going from 1 dollar to 10 dollars in a year. That steady rise in price is called an uptrend. Its steady. It takes a lot of days. Its takes a lot of candles. Now, think about a stock that goes from 1 dollar to 10 dollars in one day. That is momentum.

Trend is a direction. Momentum is a rate of price change.

If you want to follow a trend then you use trend-following tools like moving averages,Williams Alligator, etc.

When you are looking for momentum then you use tools like bollinger band, RSI, etc. These are tools that will not tell you which direction the price is going yet it tells you that there is an unusually high momentum going on.

Volume is a product of volatility and momentum. The more traders get in, the more volatile the price swings become then the more volume is registered. It is not a predictor of which price will have momentum. The same way that the volume is not a predictor of which price will have a successful breakout and which price will have a failed breakout. There are volume-less
successful breakouts and there are high-volume failed breakouts.

I hope you learn a little on my post. I will try to post more here.

I apologize if my post do not have that proper structure yet. I seem to be jumping from one idea to the next. I'm just typing as i recall the trade. I will try to post better on my next posts.

Thank you.