This article explains how to trade momentum stocks for beginners and experienced traders.
Benefit of Trading Momentum Stocks
If you can find good entries in momentum stocks manage your risk and stick to a good plan you can always trade momentum stocks very well.
However it is very important to first have some idea on how to trade the momentum stocks.
In this article I will tell you a few guides and rules you can follow to trade the momentum stocks.
Breakouts of Daily Charts Are Very Important Signal
If Nifty is rising there is a high chance that 80% of the Nifty 50 stocks will rise.
What You Can Do
Look out for stocks that had seen long period of consolidation. Stocks with good moat and market cap. If they were stagnant for a long time there is almost a certainty that they will move up along with Nifty. You can go long in these shares. It is always better to have some ideas on Candle sticks. For longer term holdings you can go for 50 days moving averages. The longer a stock is trading within a support and resistance, the more powerful the move will be when it breaks major resistance or support.
Breakdowns of Daily Charts Are Also Very Important Signal
Breakdowns is same as Breakouts except its to the downside. A mid-cap stock not doing well still trading range-bound for last 3-4 months will break its support and move down fast if overall the market condition is negative. However you may have to use derivative trading to short a stock. If you use futures or options to short a stock you must learn hedging. 50 days moving averages is also very important here.
Lookout for Pullbacks
Most stocks do not go straight up or down forever. Some stocks make a strong move up or down in matter of days but after certain percentage move a pull-back occurs. Moving averages can come at help here. When new moving average is created look for new support and resistance levels. 20 day moving average a good to know short term trend, 50 day is best for a medium term especially for mid-cap stocks. If you are looking for more profits and can give time then 200 day moving average is a good indicator.
Points to Remember To Trade Momentum Stocks
Hope this article helped you to learn how to trade momentum stocks. If you have any questions you can ask in the comments section below. If you are an options trader and losing money you can also learn hedging methods to make monthly income trading options without looking at your computer all day.
Click to Share this website with your friends on WhatsApp
COPYRIGHT INFRINGEMENT: Any act of copying, reproducing or distributing any content in the site or newsletters, whether wholly or in part, for any purpose without my permission is strictly prohibited and shall be deemed to be copyright infringement.
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However, every trade depends on the trader and his level of risk-taking capability, knowledge and experience. Moreover, stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website.
DISCLAIMER: I am NOT an Investment Adviser (IA). I do not give tips or advisory services by SMS, Email, WhatsApp or any other forms of social media. I strictly adhere to the laws of my country. I only offer education for free on finance, risk management & investments in stock markets through the articles on this website. You must consult an authorized Investment Adviser (IA) or do thorough research before investing in any stock or derivative using any strategy given on this website. I am not responsible for any investment decision you take after reading an article on this website. Click here to read the disclaimer in full.
My student gets the Winner's Certificate of Zerodha 60-day Challenge - Click here and Open Stock Buy and Sell Free Account with Them Today!!!
Testimonial by a Technical Analyst an Expert Trader - Results may vary for users
60% Profit Using Just Strategy 1 In A Financial Year – Results may vary for users
Testimonial by Housewife Trader - Results may vary for users
Comments on this entry are closed.
Nice article
Ex: Steel exchange India ltd.
This a momentum stock
Good article Dilip