Momentum vs Day trading

S

Steve1964abc

I believe I fall under the Momentum Trader category in that I may buy/sell an etf in the same day but I may also hold it for a day or two if the momentum is still going in my direction.

Does anyone have any suggestions on how to avoid what's happening with the SP500 these last couple of weeks? It seems the big movements in direction are happening afterhours and therefore I am unable to buy/sell as i would during the day.

Closing out my positions each day puts me in the day trader category correct? I'm not sure this is relevant but it does make me wonder if the Momentum Traders out there are just living with the aftermarket swings (volatility) because they don't want to close out their positions each day and pay the fees? Or better asked.... what is the mindset of the Momentum trader vs the day trader in regards to the afterhours market swings?

thanks in advance.
 
KCalhoun said:
There's no such thing as momentum trader as a formal category, it's day or swing.
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Well, it's still a grey area, because day traders can trade breakouts (momentum trading) or reversals (fade the intraday trend).

However, reversal traders can also use momentum techniques to enter a counter-trend position, so yes it is confusing.

1.-Momentum-Trading-GIF.gif
 
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A Day trader goes flat-neutral at the close. So they do not care about after hours, relative to their non existent positions. They do however ever watch the movements in preparation for the next day of trading.

A Momentum trader cares about how far a swing will move and when it will pause (for an exit or entry) and when it will reverse. These things happen after hours in the SP 500 index regularly. So they will care about after hour movements.

People who are concerned about trading after hours use instruments that are at least tradeable after hours like the CME SP500 Future ES or MES. People who day trade need liquidity, so they trade instruments that have higher volume.

With the Micro ES (MES) you can scale down to an SP500 ETF "shares" size easily. Plus with futures you are not subject to the wash rule, and you get commodities tax treatment, which at this writing is more favorable. So there is not much reason to use an SP500 ETF, IMO.

However if you use a leveraged ETF (2x-3X) that would be like using ES and the ES Options. Also note the leveraged ETFs suffer from "rounding errors" day to day, so they are not strictly 2x-3x day over day, week over week.
 
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Bad_Badness said:
People who are concerned about after hours use instruments that are at least tradeable after hours like the CME SP500 Future ES or MES.
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Absolutely, without liquidity the trader can forget about day-trading during the after hours session.
 
fwiw I almost always trade premkt, daily, but seldom aftermarket

Most of my trades are done 9:35 - 10:30

I usually trade the close, to manage swing trade position size
 
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