Momentum investors attempt to identify trends and benefit from the continued growth of that trend. They assume that trends will go on for the long term and that they should wait until the end of such trends.
Momentum investors use technical analysis to identify stocks and to know when to sell them. Unlike the typical stock market philosophy, momentum investing is based on the idea of ‘buy high, sell higher’.
Momentum investing is risky because it relies on the timing of the investor, in terms of buying and selling. If investors buy or sell at the wrong time, they will either miss out on profit or will make a loss.
The obvious benefit of momentum investing is that you can simply follow trends and make money. It’s a complicated process, however, as the stock market is often unpredictable, so it is not widely used.
Copyright © 2021 Methodology