Momentum Trading

Momentum trading buys strength and sells weakness — the bet that a stock already moving on volume will keep moving in the same direction, the direct opposite of mean-reversion strategies that fade extremes. Intraday, it means concentrating on the handful of stocks each day with a catalyst, outsized relative volume, and range.

Edge comes from selection and exits, not prediction. Momentum traders do not forecast which stock will run; they wait for one that already is, join it at a defined level (a breakout, a dip to VWAP, a red-to-green cross), and cut instantly when the move stalls. The style front-loads losses — many small stop-outs — against occasional multi-point winners, so it lives or dies on keeping the average loss a fraction of the average gain.