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How to Get Involved in Momentum Trading

Aug 21, 2008
Momentum trading can be very exciting because of the highs and the lows. The idea behind this type of investing is to find stocks that are anticipated to be either going very high or going very low on a given day. The momentum trader jumps on and rides the momentum of the stock train until a profit is reached. The trader sells his stock and looks for the next momentum trading opportunity. It can be quite the roller coaster ride.

Where does a momentum trader find his information? There are a variety of sources that traders use, and most of them are online. The momentum trader is always searching for the latest company information and follows all of the online chat rooms devoted to trading and momentum trading in particular. Day traders and Mytrader are excellent sources for online trading data gathering.

The successful momentum trader is looking to find out which companies are releasing their earning statements and whether the release will be positive or negative. The trader needs to find out what the forecasters are thinking will happen based upon the earnings release because whether it is really good news or really bad news for the company, it is all good news for the momentum trader. The momentum trader is looking for stocks that are going to skyrocket or plummet, and both are just as good.

The morning equity options pages must be examined to see whether there are a lot of written calls out for a particular company. This indicator is a significant factor in whether a stock price increase or decrease is anticipated to occur. The momentum trader is also monitoring online news channels to see if any one company is generating a significant amount of buzz. Those are companies that he will want to watch closely.

The trader will make of list of companies to watch for the day to see whether the stock prices of his companies are increasing as the market prices are going down. He will compare how the stocks are doing in comparison of how they were expected to do for the day. The stocks that are moving quicker than any of the other stocks are the ones that the trader will focus on because they represent the biggest potential for profits.

The next step is to look at the stock charts to examine the momentum of the stock as to how it performed between open and closing prices. The momentum trader is looking for a breakout stock. Once that stock has been identified, the momentum trader will buy. This is where you need to have nerves of steel. Once the stocks have been purchased the momentum trader is betting that the stock continues on its fast ride, but that doesn't always happen. Sometimes momentums fizzle and sometimes continue their ascent or descent. When the stock orders start backing up or when the bidding slows down, the trader sells his stock and turns a nice profit.
About the Author
Mark Crisp is the momentum stock trader. Finding the hot stocks that are going up right now and will continue to go up in the future. Sign up for my free e-course at: http://www.stressfreetrading.com
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