Strategies
Momentum Strategy
Trade in the direction of strong, accelerating price movement — riding trends when they are clearly established.
Key rules
- Trade only when a clear trend is established — not in choppy markets
- Confirm with volume: strong moves should come on high volume
- Enter on breakouts, consolidation breakouts, or brief pullbacks
- Trail your stop as price moves — lock in gains progressively
- Exit when volume diverges or a strong reversal candle appears
A momentum strategy involves entering trades in the direction of strong, accelerating price movement. The core premise is that assets that are moving strongly in one direction tend to continue doing so in the short to medium term.
**Momentum Signals** - Price making new highs/lows relative to recent periods - Strong impulsive candles with expanding volume - RSI staying elevated (above 60) in an uptrend or depressed (below 40) in a downtrend - Price well above or below a key moving average - Higher lows forming in an uptrend (or lower highs in a downtrend) at an accelerating pace
**Entry Approaches** 1. **Breakout entry**: enter on the close of a breakout candle above a key level 2. **Momentum pullback**: wait for a brief pullback to a moving average or recent support, then re-enter in the trend direction 3. **Flag/pennant entry**: enter on the breakout of a bull/bear flag consolidation
**Managing Momentum Trades** - Trail stop behind recent swing lows (longs) or highs (shorts) - Take partial profits at measured move targets - Exit when momentum shows clear signs of exhaustion (large wick against the trend, volume divergence)