Momentum investing: Buying high and selling higher

Gerry Legister By Gerry Legister, 10th Apr 2011 | Follow this author | RSS Feed
Posted in Wikinut>Money>Investing

The basis for momentum investing is to watch the market stock go up, and speculate that for one reason or another it may come down a little. Momentum investors in general, will quickly recognize this positive trend in the market and capitalize upon it,

Stock market

The basis for momentum investing is to watch the market stock go up, and speculate that for one reason or another it may come down a little. Momentum investors in general, will quickly recognize this positive trend in the market and capitalize upon it, usually by going after what is rising in value, and selling what is slowly falling.

Momentum investing rejects the notion that they are doing the analysis without some damage caused by their inoperative behavior of rejecting cheaper stock, to pursue the smaller profitable alternative of buying when the market is on the ascent.

The tactics used in trading on the stock market are sometimes unfamiliar to the ordinary public, but the strategies are best suited to the investors and the profit margin depends upon a number of leverages, such as the amount of capital that will be required, and the risk assessment that is involved.

Buying higher and selling high seems to make no sense, unless investors have found a way of conquering their betraying habits, by adopting short term strategies to watch the stock market for opportunism, momentum investors has a clinical edge of knowing how to follow market trend, the knowledge is invaluable and guides the investor into the direction where they can trade both ways; short selling the stock when the trend is down is a technical indication of divergence.

Momentum buying when the price is high exhibits the notion of extension analysis, by following the market trend; the strategy is to watch until the effective target has been reached, this momentum strategy is identified as the overall trend of the market increase in rate momentum.

This precedence is normally seen in bull market when stock will continue to rise, but investors are cautious to minimize the risk they take.
In the financial trends, movements go up and down, and market prices are sustained over a period of time.

The bull market is a term referring to the optimism of investors interest, in the movements of the market anticipating substantial capital gain, a bull run is like the bullying behavior of a herd of bulls, gorging upwards with their horns with respect to the market or particular commodities.

The bear market presents no surprises here, to avoid further loses investors are motivated to sell, on the way down, because of increasing pessimism, bear market is a substantial decline in prices with negative feelings feeding on itself, the market movements are caused by speculation, and expectation changes the environment, the momentum investing operates both ways with a segment of investors trying to outsmart the market.

Some people will take the view that momentum investing is just pure luck, while others place it in the category of more losses, especially if as we have seen, investors buy high and sell even higher they are investing with psychological and emotional feelings; the law of probability is possible, but the law of average estimate a greater loss.

This can be measure when share prices decline over a period of two monthly terms, bear market is heading towards a state of stagnation with recession inevitably following, the great recession in 1929 stock market crash, spelled the end of the bull market, and in addition to all other plausible trends, the losses continues to be the bench mark the market used to gage all recession trends, today's recession is expected to bottom out, when the bear market rallies in the Dow Jones share index.

In China, Soaring interest have risen again in production output, because since the beginning of last July, production in raw materials slowed down drastically, falling back almost 20% on previously held figures, pushing companies into the bear market, however.

Recently there is a new appetite in production, and commodity bulls is soaring with high expectation even with inflationary pressure, the demand for products is far outstripping the present supply. Momentum may not be a wisest choice of investment at this present juncture of timing.

The reason of course is that the Chinese have a very strong and determine mind, set upon toppling inflation, even though it is at the risk of the economy not picking up as quickly as they would have liked, due largely to the cost of modernization which is still an outstanding national debt, demands are high for China, to maintain their success story following on from the Olympic games.

But whenever the market is in decline, the demand falls short and more caution is exercised, in a bull market, prices go up and bubbles are burst, the search for momentum strategies requires the use of careful judgment, lest we forget that the market trend has a changing sequence, venture at your peril.


Investing, Investment Objectives, Stock Market, Stock Market Investment Strategy

Meet the author

author avatar Gerry Legister
I am from the UK, and I love creative writing. And I write on many different subjects, including War peace, love, happiness.

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