Introduction to Momentum Trading
On paper, momentum investing seems less like an investing strategy and more like a knee-jerk reaction to market information. The idea of selling losers and buying winners is seductive, but it flies in the face of the tried-and-true Wall Street adage, “buy low, sell high.”
In this article, we’ll look at momentum investing and its benefits and pitfalls.
Key Takeaways
- Momentum investing is a trading strategy in which investors buy rising securities and sell them when they look like they’ve peaked.
- The goal is to work with volatility by finding buying opportunities in short-term uptrends and then selling when the securities start to lose momentum.
- Afterward, the investor takes the cash, looks for the next short-term uptrend or…
