InvestorQ : Are there any generally accepted tools of momentum trading and how to apply these tools in practice?
sara Kunju made post

Are there any generally accepted tools of momentum trading and how to apply these tools in practice?

Answer
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1 year ago


To begin with, there are many technical tools that can be used to for a momentum-based approach to trading. This includes chart reading, moving averages, oscillators and relative strength (RSI). These tools are available on most broking platforms. The idea is to use tools to get well-defined entry and exit points. For most technically oriented traders, the analysis of momentum begins with defining the condition of the trend in prices. Generally, momentum is strongest at the earliest stage of a trend and weakest at the later stages just prior to a trend reversal. Consequently, a trader looking to ride a wave of momentum should attempt to use tune technical indicators that identify a stock that is breaking out of a period of subdued price action, such as short-term moving averages. In the later stages of a trend, momentum begins to fade even as prices keep advancing higher. Momentum traders often take this as a signal to exit their positions.