Momentum Investing

What is 'Momentum Investing'

Momentum investing is an investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.

BREAKING DOWN 'Momentum Investing'

This strategy looks to capture gains by riding "hot" stocks and selling "cold" ones. To participate in momentum investing, a trader will take a long position in an asset, which has shown an upward trending price, or short sell a security that has been in a downtrend. The basic idea is that once a trend is established, it is more likely to continue in that direction than to move against the trend.

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RELATED FAQS
  1. What are the main differences between momentum and trend?

    Learn to differentiate between trend and momentum, two seemingly similar concepts central to the understanding of technical ... Read Answer >>
  2. What technical tools can I use to measure momentum?

    One of the main goals of every trader using technical analysis is to measure the strength of an asset's momentum and the ... Read Answer >>
  3. What is a common strategy traders implement when using the Dynamic Momentum Index?

    Learn how to implement a common trading strategy using the dynamic momentum index that traders utilize when price is near ... Read Answer >>
  4. How do I use the Dynamic Momentum Index for creating a forex trading strategy?

    Create a forex trading strategy designed to take advantage of the ability of the dynamic momentum index to give early signals ... Read Answer >>
  5. Why is a divergence of momentum and trend important for traders and investors?

    Understand what constitutes divergence between trend and momentum and why this signal is important to investors and traders ... Read Answer >>
  6. What is a common strategy traders implement when using the Williams %R?

    Learn about Williams %R and how this momentum oscillator is used by investors to pinpoint potential reversals and plan for ... Read Answer >>
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