Momentum trading

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Momentum trading


Momentum trading is a strategy in which traders seek to capitalize on the strength of current price trends. The core idea is that stocks or assets which are moving strongly in one direction will continue to do so for some time. Momentum traders buy securities that are rising and sell them when they show signs of losing strength. Conversely, they might short-sell assets that are falling rapidly, expecting the downward momentum to continue. This approach often relies on technical indicators like moving averages, Relative Strength Index (RSI), and volume analysis to identify entry and exit points. The goal is to enter trades early in a trend and exit before it reverses. Momentum trading is popular in short- to medium-term trading and requires quick decision-making, as market conditions can change rapidly.


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