What are Momentum Strategies?

06/01/2022 09:30 AM By Matt Ratliff

So you wait nervously for the market to open eager to practice your newly learned strategy of buying low and selling high.  But you have learned the hard way that determining the "low price" to buy and the "high price" to sell is problematic.  So what about "buy high" and "sell higher"?   That is called a Momentum Strategy.  You essentially participate in a move that has already begun with the expectation it will continue (up or down).

Some people think of it as chasing performance, which is often not a good idea. But, when done properly, it can be highly profitable and provide additional diversification to your portfolio.  

Do you invest with momentum strategies?   Let me know if the comments below and we’ll see ya next time.

It feels like my greed is in control.
Many people like making many small gains and not shooting for the moon.  They like guardrails that limit emotional influence.  So check your greed and set realistic and reasonable goals.
If everyone is doing it, can it still work?

First, I doubt everyone is doing it.  Well, some do it better than others.   But, even when you think everyone is doing it, you can still take advantage of a momentum strategy.

How do I know it has momentum?

Well, I don't have a red "S" on my chest, but here goes..  Study!   Build a knowledge base of what momentum moves look like.  

Should I be doing it

You probably are already doing it, just without a plan.  So learn to recognize a developing momentum so you can join.

Matt Ratliff