Momentum Trading Explained
How to trade with momentum & read the momentum list
Intro to Momentum Trading:
Trading a Momentum Strategy is not for everyone, but it can be very rewarding when executed correctly. In this article, I will describe how a Momentum Strategy works and when it can be effective to use. Using momentum as a factor in your investment strategy can greatly improve your results and increases your odds of achieving high ROI trades when a momentum trading system is set up and executed well.
Essentially, momentum trading is a strategy in which you buy assets that have recently increased in price in hopes of a continuation in the trend, and sell assets that have decreased in price. This strategy can be adapted to fit different markets and time frames. There are three main structural and physiological phenomenons that underpin the momentum anomaly:
- Information is both diffused and acted on slowly by market participants
- Liquidity forces large investors to spread out transactions over time
- Humans extrapolate recent performance, leading to herd mentality
The Momentum List is our way of keeping a live watch on the top momentum crypto assets. You can watch our list in real-time on our social media feed (Twitter, Telegram, Discord) and trade your own momentum strategy with this information. Even if you do not trade with a momentum strategy, our list can help you track the best performing crypto-assets over time. The list will track whether the asset is strengthening or weakening and can help determine optimal points to buy or sell.
Reading the Momentum List:
The list includes the position of each coin, its current ‘slope’, and the change in position. The slope can be either increasing (+) or decreasing (-) depending on the trend in the recent price. Slope smoothes large changes in price and offers a cleaner look at the recent price action. The last category indicates if the position of the coin has changed or if it is a ‘NEW’ addition. The order of the list determines which asset has the highest momentum (highest to lowest).
Usually, when a coin is increasing in price over a period a few days, it will enter the list near the bottom as a ‘NEW’ addition. If it keeps performing will eventually make its way towards the top of the list. Once a coin has ‘topped’ it will typically start falling back down towards the bottom of the list. Use your discretion to determine if it’s a short term pullback or long term peak.
Trading with the Momentum List:
There are countless different approaches to trading a Momentum strategy. Experiment and try different variations and styles until you find an optimal strategy for you. Use the Momentum List for valuable info to apply to your own trading strategy. Here are a few potential applications of the Momentum list to your own trading strategy:
- Select from a list of top performing crypto assets.
- Determine optimal buy and sell points for the crypto assets you trade.
- Use the list to determine the overall health of the crypto market.
I hope this article helped further explain momentum trading and how to use it to your advantage in your own portfolio. Visit ryzecrypto to learn more.
