Momentum trading requires that you are able to estimate or monitor
the energy behind the movement of a stock, futures or Forex pair. When
trading it is not good enough to dimply see that it is going up or down.
The problem with the simple approach is that the stock may be approaching
support or resistance, and some other technical indicators such as moving
averages, stochastic's or MACD may be telling you that it is going to reverse
direction, but in fact it is not because of the huge momentum in the stock.
So what happens is that it blows right past the point where you think it was
going to reverse, this sort of situation tends to occur towards the end of a
trend. The stock may eventually reverse but you will not have gotten as good a
price, and of course if you are trading short term options this can be a
Of course the opposite can also occur, if you are able to
correctly monitor momentum you will see the momentum reversing long
before the stock makes it's big move, this allows you to get in very early and
make a much better trade.
I've only touched on the basics here, the
truth is that if you are not using momentum in your technical analysis you are
really trading blind.
If you want to get a 1st class education in
trading trading from a real professional trade you must read more using the
Momentum Trading System
Warning: This course is for professionals only - amateurs don't even think
See also: Trend Trading
and Swing Trading Course