Written by Taras Korytnyuk

On May 15, 2020
Momentum Trading

What is Momentum Trading?

Momentum trading (also known as momentum trading strategy one of the News Trading Strategies) can be a single or multiple candles. We then see in the chart large or growing candles or several bullish/bearish candles that occur one after the other. I often refer to large candles without a wick or with a small wick to as high momentum course candles.

Momentum thus refers to the increase in the “swing force” of a price movement. If the speed or force of a price movement explodes, we call this increasing momentum.

Great momentum coupled with a high volume that moves the price are excellent indications for another momentum

As you can see in the example, the momentum continues. As long as bullish candles occur, there is no reason to close the position in Momentum Trading itself. Momentum Candles are often the introduction of big trends.

Especially after important news, one can often observe how with the news and the emergence of the Momentum Candle under high volume then also the momentum continues, and a trend establishes itself (also called Pivotal News Point).

Because the emergence of a Pivotal News Point often changes the future growth prospects for the company. This is attracting more and more investors and equity analysts adjusting your ratings and price targets. Thus, relevant fundamental news is often the beginning of a trend (or the end).

Stocks that open with a gap because of news, followed by a large high-volume momentum candle. The point of the gap opening is called the Pivotal News Point. If the course stays above the point and breaks to a new high, Jesse Livermore has gladly slammed. This strategy still works today.

news momentum strategyFor example: Apple shares open after news with up-and-coming gap and Momentum candle

Also, the stock can consolidate for some time and then break out upwards.

But it’s best even when the stock takes out the low of Pivotal Point once again (stops broken and the market cleans up) and then breaks out to new highs. A simple but effective approach for Momentum Trader.

Many market participants additionally refer to Momentum as a pattern.

This isn’t clear. Since you need to recognize a force and a pattern. Regularly, developing energy is the start of a pattern, or a sign that we finish it. However, Momentum alone has nothing to do with a pattern. 

For instance, a solid bearish force may happen in an upward pattern, yet the upward pattern may endure. The bearish force is in this way not a pattern. This is only a remedy. Pattern following brokers would not play this descending remedy. Force dealers, then again. They follow the force. Obviously, the odds increase essentially on the off chance that you likewise exchange with the pattern. The individuals who exchange unadulterated energy can likewise take an interest in revisions. 

We should also note that the biggest gains are always on an upward trend. Because a stock can fall a maximum of 100%, but theoretically rise infinitely.

Good luck and Check out our News Scraper Platform 🙂

Momentum trading

 

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