Top Advantages Of Momentum Investing
Momentum investing involves buying stocks that are trending up and assuming that the stock will continue to go up. It is an interesting and simple strategy.
A trend trader will then hold onto the position until it starts to turn around. Once it does start to turn around however, a trend trader will exit out of the position.
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.
But that point of view is wrong. A stock that is trending up will be more likely to continue going up in the short term then it is to turn around and start crashing all of a sudden. Of course stocks do go both up and down, so crashes happen, so you do have to be prepares. But if you stay away from a stock's price simply because it has hit a new high you are missing out on some great profits.
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. Simple Strategy
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 common stock tips out there is to look at the company's fundamentals and use that to make your buying decision. With trend trading it can be a good idea to look at the fundamentals, but with trend trading you don't really need to understand how to read it. The stock chart will tell you everything that you need to know.
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.
Article Source: FxTradingStock.com
About the Author
For more on momentum investing or other stock market information visit Shaun's site about the stock market basics
by: Shaun Rosenberg
Total views: 26
Word Count: 442
Date: Wed, 7 Jul 2010
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