www.CandleStickForums.com Trading Momentum Stocks Trading momentum stocks works for two basic reasons. It has been demonstrated that stocks that have been performing well tend to continue to outperform the rest of the stock market. Theorists argue as to whether this phenomenon is due to irrational investor behavior or a fundamental reason that these stocks are better managed companies that continually prosper while others fail. For the trader or investor trading momentum stocks the theory does not matter. What matters is having an efficient system of stock market analysis for recognizing and trading stocks that seem to have momentum. When trading cyclical stocks a day trader will look for support and resistance zones. Day traders will look at Candlestick pattern formations to help them determine when to buy stock and sell stock. Long term investing dictates that the investor must perform fundamental analysis of a stock. So, why can a trader simply choose a stock that is going up and jump on for the ride? Because very often it works out quite well! Whether the fact that a stock keeps going up in price is due to irrational psychology of investing or a warped psychology of trading makes no difference in technical analysis of stocks. It is the time honored principle of Candlestick basics to let the market tell you what the market will do. In value investing the investor may often discover an overlooked and undervalued stock with promising prospects and a ridiculously low price to earnings ratio. A small cadre of investors who follow just a few market sectors may have found a stock and may be progressively bidding it up. The successful individual in trading momentum stocks does not really care! The trader or investor trading momentum stocks just engages in trend analysis and follows the trend.

1. Trading Momentum Stocks
By www.CandleStickForums.com

2. www.CandleStickForums.com
Trading momentum stocks works
for two basic reasons.

3. www.CandleStickForums.com
It has been demonstrated that
stocks that have been performing
well tend to continue to
outperform the rest of the stock
market.

4. www.CandleStickForums.com
Theorists argue as to whether
this phenomenon is due to
irrational investor behavior or a
fundamental reason that these
stocks are better managed
companies that continually
prosper while others fail.

5. www.CandleStickForums.com
For the trader or investor trading
momentum stocks the theory
does not matter.

6. www.CandleStickForums.com
What matters is having an
efficient system of stock market
analysis for recognizing and
trading stocks that seem to have
momentum.

7. www.CandleStickForums.com
When trading cyclical stocks a
day trader will look for support
and resistance zones.

8. www.CandleStickForums.com
Day traders will look at
Candlestick pattern formations to
help them determine when to buy
stock and sell stock.

9. www.CandleStickForums.com
Long term investing dictates that
the investor must perform
fundamental analysis of a stock.

10. www.CandleStickForums.com
So, why can a trader simply
choose a stock that is going up
and jump on for the ride?

11. www.CandleStickForums.com
Because very often it works out
quite well!

12. www.CandleStickForums.com
Whether the fact that a stock
keeps going up in price is due to
irrational psychology of investing
or a warped psychology of
trading makes no difference in
technical analysis of stocks.

13. www.CandleStickForums.com
It is the time honored principle of
Candlestick basics to let the
market tell you what the market
will do.

14. www.CandleStickForums.com
In value investing the investor
may often discover an overlooked
and undervalued stock with
promising prospects and a
ridiculously low price to earnings
ratio.

15. www.CandleStickForums.com
A small cadre of investors who
follow just a few market sectors
may have found a stock and may
be progressively bidding it up.

16. www.CandleStickForums.com
The successful individual in
trading momentum stocks does
not really care!

17. www.CandleStickForums.com
The trader or investor trading
momentum stocks just engages
in trend analysis and follows the
trend.

18. www.CandleStickForums.com
Trading momentum stocks
involves generating trading
software trade signals by
following current market
calculations, moving averages,
and channel breakouts to
understand market direction.

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The individual will trade stocks
that fit a set of criteria and sell or
buy stocks based upon a
predetermined trading strategy.

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Because the trader does not care
what the underlying reason is for
the stock price movement, he or
she needs to have a
predetermined set of rules for
exiting a trade if the market
reverses.

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Risk management in trading
momentum stocks includes the
current market price, how much
money is in the trading account,
and market volatility at the exact
time of trading.

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As these factors change, the
investment risk management
equation changes.

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This calculation should be part of
the trading software.

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When prices change, the size of
the trade typically will increase or
decrease.

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The degree of market volatility
will also help determine the size
of stock trades.

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Day trading in momentum stocks,
whether the movement is up or
down, typically involves the
longer term movement of a stock
or the "turnaround" of a stock in
the market.

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This type of trading looks for
stock market trends, not stock
market reversals.

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When there is a change in price
movement the trader needs to
have a pre-established strategy
that leads to a quick exit from the
stock position.

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However, once the trend
establishes in the other direction
the trader can trade the stock
again.

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Trading momentum stocks works
in both directions.