Learn core momentum indicators, trend confirmation methods, and how to ride trends without chasing tops.
Momentum trading is based on the principle that "assets in motion tend to stay in motion" — rising assets tend to keep rising, and falling assets tend to keep falling. Traders enter in the direction of the existing trend.
RSI > 50 indicates bullish momentum; RSI < 50 indicates bearish momentum. Note: RSI > 70 doesn't necessarily mean sell — in strong trends, RSI can remain elevated for extended periods.
The MACD histogram's direction reflects momentum changes. A histogram flip from negative to positive signals emerging bullish momentum.
ADX > 25 indicates a strong trend, suitable for momentum strategies. ADX < 20 means no clear trend, where momentum strategies underperform.
Calculates the percentage change between current price and price N periods ago, directly measuring the speed of price change.
Don't enter after a significant rally. Wait for price to pull back to support (MAs, Fibonacci levels) before entering.
Rallies need volume support. Price increases without volume are often false breakouts.
Define target prices and stop-loss levels before entering to avoid emotional decisions.
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