Imagine you are surfing a powerful wave not by expecting where it will form, but by locating it as it rises and taking the advantage of this rise as long as it lasts. This is the key characteristic of momentum trading, i.e., identifying a stock already in motion and capitalizing on its ongoing momentum to earn profits. <\/p>\n\n\n\n
As the name suggests, momentum trading is a trading approach focusing on the buying and selling of stocks based on the trend, or \u2018momentum\u2019 they show. Like all approaches, it has its strengths as well as weaknesses but the core advantage of employing this strategy is the potential of generating significant profits with small capital when compared to other strategies.<\/p>\n\n\n\n