HOW DO YOU MAKE PROFITABLE MOMENTUM TRADES?
“THE CONSERVATION LAW OF MOMENTUM STATES THAT THE MOMENTUM WILL REMAIN CONSTANT NO MATTER WHAT, UNTIL AND UNLESS ANY EXTERNAL FORCE COMES INTO ACTION”
As with any other decisions involving money, humans tend to get emotional when it comes to trading. Momentum trades bring tremendous volatility and can mean major fluctuations in account balances; as a result, can be quite clenching to watch. So how can a trader approach such an outstanding potential of this type of play and trap profits from such an opportunity, given the difficulty of the situation?
Firstly, allow me to explain what a “MOMO Play” is: It is a slang term used to describe an advanced trading strategy based purely on momentum. In a momo play, the trader is simply, not interested in the company’s fundamentals, but only in the short-term direction of the security’s price movement. As such, momo plays are used solely by day traders, not by buy-and-hold investors.
There is no foolproof solution when it comes to stock trading, but there are some ways to improve your chances. The first is doing your due diligence. For example: avoid companies with large convertible notes, as they would be likely to dilute into heavier volume. Additionally, don’t buy in as the volume is starting to fade. The key is to get in while the volume is starting to heat up and to get out before things cool back down. This will help you avoid holding worthless bags.
Finally, be sure to book profits early and often. Much like trading a news play or any other type of investment, things that go up do come back down. It is senseless to watch your account balloon on paper and realize none of the gains because the stock comes back down while you are holding on for more gains.
Perhaps the most difficult part of momentum trading is finding the right stocks at the right times. Fortunately, there is a great resource for all new traders: Sign up for free momentum trading alerts and watch your inbox for the next great opportunity. Don’t forget to follow us on our social media pages.
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Let’s dominate and make money together! Happy Trading!