Benefits of Momentum Investing
Momentum investing is an interesting strategy. It involves buying a stock that is trending up, simply because the stock is trending up.
Trend traders will hold onto the position, just until it starts to turn around or stops going up. Once it does it is time to get out of it.
It is a nice and simple strategy that can be pretty profitable if done correctly. But so many people are willing to write it off and consider it a bad strategy that will get you into a stock at the top right before the market crashes and you lose all of your money.
This is not true. It is proven that stocks which are trending up are more likely to continue that trend in the future. It is true that stocks do tend to get overinflated and crash, but who knows when that will happen. I have seen plenty of stocks that were considered to be overvalued go up 50% in the next 2 months and go up after that. You simply do not know when a stock will turn around so why no hold onto it and keep some stop losses in place just in case.
Here are some reasons that trend trading can be a powerful strategy.
1. It is Not Speculating
Trend traders are not really speculating or assuming something big will happen in the market that will push this stock higher. If the stock is already going up then it is likely to continue. The only chance that you would be taking is that it is going to continue its trend.
2. It’s Simple
One other big advantage of trend trading is just how simple it is. If the stock is going up buy it, if it is going down sell it. That’s all there is to it.
Simplicity really is a great thing.
3. You Do Not Need to Be Genus
One of the many stock tips people will tell you is to check out the company’s fundamentals. If a company is fundamentally strong then it is worth buying if not then it isn’t. With trend trading it can be a good idea to learn the fundamentals, but you can make money without knowing it.
You don’t need to know why the company is going higher; you simply need to understand that it is. You can look at all the hard facts that you want, but sometimes it is just easier to trade what you see rather then what you think.
For more on momentum investing or other stock market information visit Shaun’s site to help you learn about investing into stocks. Unique version for reprint here: Benefits of Momentum Investing.
Popularity: unranked [?]
