Catch Trades When Momentum Moves Market
A great trading strategy involves a variety of indicators – including momentum, the key indicator that measures market movement.
Some traders try to pick the very top or the bottom of a trade. Both are highly improbable targets. When stocks are in a downtrend, they continue in that direction unless there is a catalyst to reverse momentum.
In this wild market, Simpler’s traders tend to wait for the market to push back up, then take trades following the pullbacks. The market momentum then pushes prices higher, and trades are more consistent.
A momentum chart indicator determines when a stock (or another tradable asset) is rising or falling in the market, as well as how quickly the price is moving in one direction. There are a variety of momentum indicators available to traders. Simpler’s traders use indicators that incorporate the Stochastic indicator which measures how far the open and close prices have traveled from the top to the bottom during a move.
The direction of the market – an uptrend or a downtrend – can be determined by charts and the technical signals they provide. During chop, the market often has high volatility with little momentum. When the market consolidates, it strengthens its movement and structure forms.
As experienced over the last year, the market often responds to the news. Simpler’s traders watch for this movement in combination with chart signals and work to take advantage of subsequent market action. Positive news can cause increased buyer interest. Bad news can cause the market, or an individual stock, to make a move to the downside.
News, good and bad, can propel a stock or the overall market into increased movement that signals to traders to watch for a change in momentum.
When Simpler’s traders combine momentum indicators with other market factors and years of market experience, their ability to determine momentum becomes a valuable tool.