Momentum Investing Shocking Secrets

As a trader, you are always looking for short term profit. While as an investor, you are willing to invest long term in a company or a security to make capital gain. In trading, you are always looking for making profit from the volatility in the market. Day trading has a short term time horizon of only one day. A day trader opens a trade and closes that trade in the same day to make a quick profit. Day traders need quick reflexes as well as a keen observation of the market volatility. Many people day trade successfully. However, on the other hand hand, many people have a long term time horizon of many months to years. They have a long term financial goal and this matches with their investment style.

Now a company’s stock may have a good long term prospects supported by strong fundamentals. But the stock may stay still for a long time before it catches the attention of the media and the investing public before it’s price get’s bid up. So an investor might have to wait for a long time before realizing a return on his or her investment. Many investors can learn a few tricks from day traders that can help them make a quick profit in a matter of days orn weeks instead of months or years.

There is a general problem with so many investors. They fall in love with their investment after doing so much research and committing so much time for the position to work. Now, day traders are always hit and run types. They have developed an innate sense of discipline among themselves that teaches them when to commit money to a trade and when to cut and run. So, many investors when they fall in love with their investments on the long run forget this cardinal rule of trading that you have to cut your losses. Market least care who you are and how long you have been in it.

Now as a momentum investor, you need to look for securities that are going up in prices especially if accompanied by the underlying growth. What this means is that instead of buying low and selling high, what you will be doing is buying high and selling even higher.

When a security goes up in price with a strong demand underneath it, it said to have price momentum behind it! Now, as a long term investor, you should look for securities having momentum behind them just to avoid getting stuck with securities for months before they start moving. It pays to be patient. But it works even better when the money that you invested works for you while you wait.

Now, when the price of a stock or security increases because of strong demand, it is said to have momentum behind it. When, there is momentum behind a security, it means that it’s price will continue to icnrease as long as it has got momentum. This way by investing in stocks having momentum behind them, you avoid the risk of getting stuck in stocks that might not move for months and months.

Now, when doing momentum investing, you need to also do some fundamental research behind the company. As most of the momentum investing done during the dot com bubble was on hearsay without being supported by any strong fundamentals! However, if too many investors start practicing momentum investing, it sometimes leads to bubbles like the tech bubble that happened at the end of 1990s.

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