Momentum Strategy for WSDT
Day trading strategies for WSDT Oct 25, 2019
Currently, the momentum strategy is one of the most widely used strategies in day trading.
Today, we would take a look at it from various angles as a subject matter and whether it makes the cut as a top-level strategy. We would also take time to answer crucial questions such as:
What Is the Momentum Strategy?
Some believe momentum(a.k.a trend-following) strategy is an investment strategy that takes advantage of the continuance of existing market trends. That is hitchhiking on stocks that the majority of traders or investors are buying.
It involves stocks showing heavy upward trending and short the respective assets with down-trending.
The core ideology of momentum strategy is that large increase of stocks will be followed by additional gains and the other way round. It is largely influenced by market timing based on recent trends. It also takes into account the volatility of stocks.
Momentum strategy grabs the trends that have the ability to hold off for a considerable amount of time by keeping up with a trend.
In the long term effect, financial markets go up but in recent decades, there has been a sharp increase in volatility.
It is however very important to note, that momentum stocks can fizzle out when not buttressed with solid fundamentals.
How Is the Momentum Strategy Used In Day Trading?
Momentum strategy incorporates a pattern of stringent rules embedded in technical and analytical green lights that influences entry and exit points for certain stocks in the market.
Most day traders use this strategy to juice out trading signals from two long term moving averages, one a bit shorter than the other.
Day traders, who use momentum strategy as the playing card, use another derivative of this strategy, which consists of signals based on price to trade on EFTs with the strongest momentum while shorting the ones with the weakest momentum.
Is the Momentum Strategy Popular Among Day Traders
In a broader perspective, every trader in one way or the other follows a trend, and this is what makes momentum strategy popular among day traders.
The underlying concept that stocks that have risen in the past tend to keep rising, and stocks that have poor performance tend to keep failing makes it a catchy gospel for most day traders.
Ali Biggz, one of the Top notch WSDT mentors eulogized the momentum strategy with these words:
“I think the momentum strategy is the best strategy to use because in most cases, a
stock that has good upside or downside momentum has some sort of catalyst. With a
good catalyst comes volume and with volume, comes good range.
Combining momentum trading alongside other strategies like pivot points, or reversals,
can really give you an upper hand in the market, especially if you have learned how to
interpret the news, and how that news is going to make the stock do certain things.”
Is momentum a good strategy for WSDT?
In a general overview, quite a number of mentors used this strategy for quick gains to top the charts.
Jeremy Newsome thinks it is a good strategy for WSDT because:
- It gives a very good volume value indications
- It paints an in-depth picture of the bullish stop entry and stop-loss exit
- Excellent price trend indicator
Ali Biggz solidifies it with affirmative comments on why he thinks the momentum strategy is good for WSDT by saying:
“Momentum trading is going to be good for the WSDT because stocks that have high
momentum will give you good range. A good range equals a great opportunity for you to
make money. This is because major support and resistance areas have been broken, or
will be broken and previous gaps will be looking to get filled.
It also allows you to be able to get in and out of a trade and take quick profits. Versus being in stock with very little volume and no momentum”.
The momentum strategy is a good strategy for day traders with brisk trading philosophy. As a matter of fact, it falls in line with the nature of this competition and some mentors have already concurred with this concept.
However, it would be a laudable idea to use it with strong fundamentals for good gains.
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