Momentum trading is a strategy in which you open trades only in the direction of strong price trends, capitalizing on the continuous price action and exiting before a reversal.

Momentum traders do not necessarily concern themselves with where a trend ends and begins but instead focuses on opportunities from the main body of the trend. In this mindset, traders may “buy high and sell higher.”
While momentum trading follows short-term trends, it should not be confused with trend trading, which refers to longer-term trades. Trend trading, or trend following, applies to macro asset classes only and ignores the short-term fundamentals many momentum traders watch closely.
Momentum trading works if you believe in sustained market trends. A quick glance across a few charts usually reveals that they exist – upward price swings can last several days or weeks, and a short squeeze can draw on for an even longer period.

However, there are no guarantees that the trend will continue. Trading momentum leaves you at risk of reversals and price corrections. The strategy requires close attention to your trades, as a stalled price can cause selloffs that quickly snowball.

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