Momentum Trading Mastery

In This Lesson

Riding momentum in trending stocks.

Duration: 30 min

Overview

Riding momentum in trending stocks. This lesson will provide you with practical knowledge and actionable insights you can apply to your trading immediately.

By the end of this lesson, you'll have a clear understanding of the concepts and be able to apply them in real trading scenarios. Let's dive into the details.

Key Concepts

Momentum Stages

Momentum moves through predictable stages: accumulation, acceleration, climax, exhaustion.

Relative Strength Analysis

Comparing stock performance to market and sector to identify true momentum leaders.

Volume Confirmation

Volume must increase with price movement to confirm genuine momentum.

Momentum Indicators

Technical indicators that identify momentum strength and potential exhaustion.

News-Driven vs Technical Momentum

Different types of momentum require different trading approaches and risk management.

Practical Application

Now let's put this knowledge into practice. Follow these steps to apply what you've learned:

1. Scan for stocks showing early momentum signs: volume increase, relative strength, key level breaks
2. Confirm momentum with multiple indicators: price, volume, relative performance
3. Enter momentum trades in stages: starter position on initial signal, add on continuation
4. Set trailing stops to capture majority of momentum move while protecting profits
5. Monitor for exhaustion signals: volume decrease, momentum divergence, overextension
6. Have predefined exit criteria for different momentum scenarios

Common Mistakes to Avoid

Chasing Momentum Too Late

Entering momentum trades after the move is already extended and about to reverse.

Holding Momentum Too Long

Staying in momentum trades past their natural exhaustion point, giving back profits.

Ignoring Overall Market Context

Trading individual stock momentum without considering broader market direction.

Key Takeaways

Early identification is key to profitable momentum trading
Volume confirmation is essential - price without volume is suspect
Momentum trades require different risk management than other strategies
Market context significantly affects individual stock momentum success
Knowing when to exit is more important than knowing when to enter

Your Next Steps

Ready to continue your learning journey? Here's what to do next:

• Review this lesson's key concepts
• Complete the practical exercises
• Take notes on what you've learned
• Practice with a demo account
• Move on to the next lesson when ready