Big Winner – Big Volume

In order to maximize returns on stocks that explode higher, a trader must be willing to jump into a trade right at the open. However, since there are thousands of stocks out there, how do you make sure you jump into the right one? You use software that gives you an edge.

Let’s use ZM example. The stock went up by almost 10% on one of the recent trading sessions.

ZM, 1m

How would you know to go long at the session open? By tracking volume and price in the opening first minute. Let’s start with the volume. ZM’s first minute volume on that day was 391K shares. In dollar terms, at an average price of $184, this volume was equal to $72m of buy/sell transactions.

ZM, Volume

Just knowing this one number is not sufficient to draw any conclusions. It is more important to compare it to the prior 10 trading sessions and derive the ratio. In our case, the prior 10 trading sessions saw an average of 142K shares on the first minute of trading. So, the ratio on that day was 2.8 (391K / 142K). Hence, the number of shares traded the first minute on this day was almost 3 times higher than the previous 10 trading sessions.

ZM, First Minute Volumes, Thousand Shares

The second important piece of information that a trader should consider is the first minute candlestick. Ideal case: the stock price should go up by at least 1.0% and close at the minute’s high. That’s exactly what happened in our case (see chart below).

ZM, 1m

When these 2 conditions are met, you enter into a long trade.

Software

Tracking stocks manually in order to identify similar trading opportunities during the opening minutes is extremely difficult. Hence, I decided to automate this search through the software I am currently building. The software will track over 1000 most popular stocks on Nasdaq and NYSE (read: highest volume stocks) and will contain an algorithm to identify these unusual volume trading opportunities.

2 thoughts

  1. currently using relative volume, or RVOL, scans in the pre-market and at open. looking fwd to how yours will improve catching the big names that move.

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