| Early Morning POP and DROP Day Trading System (POP
& DROP) plays are very compelling in that they offer the thrill and relative
low risk of day trading without the normal day trading commitment - watching the market
all day. Both POP & DROP allow traders to put on a play within the first 15 minutes
of trading and go on with their normal day. Upon filling the order, traders put in a limit
order (sell or buy to cover order) for about 2.5%, 50 cents or $1 profit and go back to
their jobs. Check in at lunch to verify or alter your round trip play. (NOTE: protect your
Trading Capital by setting 10% stop losses if you walk away).
These plays require strict adherence to the principle rule of day trading - exit all
trades by the end of the trading session regardless of gains or losses.
The system is simple:
Our nightly Trading Update will list up to 5 stocks that average an 80% or better odds
to POP or DROP in price by the Target Profit level amount.
Traders enter a position shortly after market open and upon being filled, they enter
the upside (POP) or downside (DROP) limit orders - typically for 1/8 - 1/4 profit - as
their exit.
Why POP and DROP Day Trading Works – Trading with the Odds in Your Favor.
- Predictability - play the highest odds (80% or better odds of popping
or dropping at least the Profit Target amount)
- Market makers must provide liquidity on both sides of the market
(regardless of general upside or downside market trend)
- With enough volume, traders can often buy at bid and sell at ask
(quicker executions and fills. "Scalping small profits" rather than missing
trades trying to execute prime entrance and exit prices)
POP and DROP Plays Overview
The double edge sword of day trading is risk. Day traders avoid the risk of
exposure by exiting all trades at the end of each session. Reaction to post-market
news and events has taught them it's best not to be in the market when they can't trade in
the market.
However, this forces day traders into a position of high risk to low reward trades.
They bury the risk/reward needle, often risking ten dollars or more to make $1. Our
POP and DROP Stock Picks can even out that risk/reward ratio by helping you play the best
stocks for day trading.
Momentum Day Trading is the art of getting into a stock during a short-term trend and
getting out before the trend ends and reverses. This simple plan is not simple to execute,
especially with wily market makers trying to wiggle you out without a profit. Parts of
momentum day trading can be learned, but innate instinct and reaction are a large part of
the package of a successful day trader, and those traits cannot be learned. You have them
or you don't.
POP and DROP Plays can be learned. They're great tools for experienced day
traders and can be the saving grace of new day traders. The reason POP and DROP plays are
accessible is that they're based on an objective data point - a stock's opening price -
and not on a trader's ability to detect trends. POP and DROP Plays are purely mechanical
plays - there are simple rules that must be followed and little, if any, discretionary
decision making needed.
All POP and DROP Plays involve stock picks with very strong records of going one way
after they open trading on the day. There are more than 150 indicators that can be applied
in technical analysis - some of these indicators are helpful, many of them are closer to
voodoo. There are only so many reasonable extra extrapolations that can be made from
five objective data points (open, high, low, close, volume). The two most reliable data
points are the opening price and the closing price. The only one you can trade on in the
same day is the opening price, and this is what POP and DROP Plays are based on.
POP and DROP Stock Picks
Stock Picks with the Odds in your Favor! Our POP Picks are
stocks with a strong record of opening and going up during the day; The DROP Picks
are stocks with a strong record of opening and going down during the day.
You may want to choose from the three POP or DROP Profit Levels based on how much
capital you have to risk.
The 2.5% POP and DROP plays require the least amount of capital and the $1 POP or DROP
plays require the most.
Trade POPs and DROPs In Trend with the "Nasdaq-100 Pre-Market Indicator".
In other words, Trade POPs when the Pre-Market Indicator is UP; Trade DROPs when the
Indicator is DOWN
Unlike the Amazing Twelve O' Clock Hour Stock Trading System (Nooners), the POP
and DROP Day Trading System is not dependent on the Market being UP to capture gains.
As you should remember, we DO NOT Trade Nooners if the Market has been Trending DOWN all
morning.
Trades are entered within 15 minutes of Market open, as clued by the Pre-Market
Direction. If you are uncomfortable making SHORT Trades review the "Shorting
Stocks" Trading Lesson before Trading the DROP Stock Picks.
Price and Volume Consistency are needed in POP and DROP Trades. Along with special
closing price and bullish/bearish technical indicators, an average volume greater or equal
to 500K is required before a particular stock is included on our daily POP or DROP Stock
Pick list.
If a particular POP/DROP Stock Pick is breaking out in volume or price, pass it up,
Trade another. A break out action is great for peak and slam plays, but it'll trash a good
POP and DROP trading strategy.
POP and DROP Play Profit Targets
2.5% POP and DROP Play
The 2.5% Play is really a lot of fun. You can take a position at the open, set your
limit order for 2.5% profit and many times just forget about it. We call these
maintenance-free day trade plays. Just put in the order, go to your morning
meetings, and come back at lunch to confirm the sell or buy to cover order.
$.50 POP and DROP Play
These Picks are stocks with a high probability of rising at least $.50 from their
opening price. We pick stocks that have good intra-day movement and are not much of a
collapse threat. (Note: a $.50 Profit Target is only a guideline. In general, the odds are
80% for reaching $.50 Target, 85% for reaching $.40 Target and 90% for reaching a $.25 to
$.30 Target. We usually POP or DROP for $.40 when we can watch the trade, and $.25 for
maintenance-free trades).
$1 POP and DROP Play
Stocks making our $1 Play List are the Who's Who of Momentum stocks. These stocks often
have daily ranges between $2 and $22. Highly skilled day traders can make a
comfortable living off these stocks. But there are probably fewer "very
skilled" day traders in this country than there are professional athletes.
Until you've developed the skill to trade these fast moving stocks on Momentum only,
make POP or DROP $1 plays on them - buy at the open, enter your upside (or downside) limit
order for a buck more, and go home happy and safe.
Entry Points - The more predictable a play the better. Our POP and DROP Stock Picks
have an 80% or higher rating (meaning 80% of the time the stock move in the desired
direction the desired amount) and a minimum average volume of 500K.
Just pick the stock(s) you like and buy at the open - many traders buy 1,000 shares or
more to maximize the scalp. For a more aggressive play, you can assemble a watch list of
seven or eight stocks you like for the day and buy the one that opens and runs DOWN 1/8 or
1/4 (POP Picks) or runs UP 1/8 or 1/4 (DROP Picks). However, employing this strategy may
get you into a play that's going to be part of the 10% where the stock does not rise (or
fall) enough, but if you clip it, you may get your profit even easier and sooner.
Exit Points - Again, as soon as you are filled on the order, immediately enter an
upside (or buy to cover) limit order for your profit target (2.5%, $.50, or $1) or
slightly less. Repetition and consistency are critical in this play. There's no tolerance
for greed in a scalping play - get in and out for a small profit.
POP and DROP Day Trading System Summary
POP and DROP plays are scalping plays - don't get greedy!
Get into the Trade within 30 minutes of the opening bell (within 15 minutes is better)
or not at all!
Get out of the play at the end of the day - regardless of gains or losses
Beware of the price/volume explosion stocks - they may not be good POP and DROP Trades.
Assess the Risk/Reward. POP and DROP Plays are walk away trades made most
profitable when traded at 1,000 shares. Generally the Profit Potential is $250, $500 and
$1,000 for 2.5%, $.50 and $1 Plays respectively.
Pop & Drop Strategy, Questions & Answers
From: Mark
To: MoPayDaze.Com
Mark wrote: Hello,
I have a question on the Pop & Drop Strategy. In the lesson it says to buy at the
open within the first 15 min preferably. Does that mean I should do a market, limit, or
stop order?
Reply: As a rule, we use "limit" buys with protective "stop" loss
orders. For 2 reasons. First a "limit" order to buy keeps us from buying at a
temporary "price explosion peak". It's better to miss a Trade completely than
get caught at a Top with nowhere to go but down when your Profit Target is Upward. Second,
we use "stop" loss orders in case our computer, DSL connection or broker
execution program crashes during a active trade. Of course, if you are going to be away
from your computer, you'll want to set a "stop" too. We feel it's better to be
safe than sorry.
Mark wrote: Also, if there are no recommendations for POPs and the pre-market sentiment
is trending up I am not supposed to play the drop recommendations. Correct?
Reply: Correct (sort'a). In theory, you should be able to Trade both regardless of the
pre-market sentiment because you are trading with the odds in your favor by 80% or more.
However, the "or more" is never equal to 100%. Trading POPs when pre-market is
Up and DROPs when pre-market is Down "reduces" (but does not eliminate!) the
chance of getting caught Trading a POP or DROP pick on an "odds buster" Day.
In addition, we have found that POPs generally pop faster when the pre-market is Up
just as DROPs drop better when it's down. And, personally, we like quick profits that free
up our Trading Capital in time to Trade Nooners!
So you still want to tempt the Trading Fates and play the DROPs during an Up-trend or
vice versa. Okay. May we make this conservative suggestion? Target Profits of lesser than
full amounts and tighten your loss stops! Nowhere is it written that you HAVE TO Trade
Dollar Drops for a full Dollar. 80 or 90 cents Price Targets makes for a Profit too!
Likewise on 2.5% and 50 cent Profit Targets. Consider shaving 10 to 20 percent off when
trading against the pre-market sentiment.
Mark wrote: Although I noticed in my paper trades that when the pre-market is trending
up then those recommended drops that are opening higher than their previous close seem to
act like Pops.
Reply: Two things could be happening here. First, and we quote from our POP & DROP
Trading Strategy Lesson, "If a particular POP/DROP Stock Pick is breaking out in
volume or price, pass it up, Trade Another. Break Out Actions are great peak and slam
plays, but it'll trash a good POP and DROP trading strategy."
Second, often a particular Stock has BOTH an 80% or better POP and DROP Average. As a
rule, we will list it as if it were only one or the other. We tend to favor the DROP
category (if averages are equal) because of current "Bear Market" conditions. Or
we won't list it at all because it's too confusing to someone first learning this Trading
Strategy.
Keep in mind, the biggest plus to the POP and DROP Trading Strategy is that one does
not have to depend on mastery of the finer points of Technical Analysis or Level II to
find and execute profitable trades. But it is us that have to adapt our Trading Strategies
to the Market, not the other way around.
The DROPs that you say were "acting like POPs" where not "acting like
POPs" at all! They were acting like Momentum Stocks - and that's a different Trading
Strategy all together!
Mark wrote: I had a great paper trade today doing the five recommended drops taking .25
profit on four of the shorts in about 15 min and then the 5 fifth took about 4 hours
before it hit my target but it did hit. So if that was real money I would have made 1K
today. I can't wait to feel confident with consistency on this strategy because it allows
me to go to work and not worry my trades. Thanks, Mark
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