Momentum Trading
Short-term trading (swing trading) relies on both overreaction to surprises and to momentum within a short-term trend. Chapter 12, “Momentum Oscillators—Duration and Speed of a Trend,” examines momentum in the context of longer-term trends. It is closely associated with short-term buy and sell activity, often involving only a two- to five-day turnaround. Momentum often is the impetus for closing trades even if the original intention was to keep the position open longer.
Momentum is a popular method for determining whether to open a position and, once opened, when to close it. It is a binary index, a statistical summary of a moving average equated to an artificial index. A specific index value marks overbought conditions, and ...
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