Momentum Stocks – Hot Stock Investing?
What is a momentum stock? It is a stock that gains momentum or begins to rise stronger than before. These are the stocks which make such tremendous moves like 100% -1000% per year. Yes, these kinds of stocks are rare but they are still there. Stock Investing based on momentum stocks could be very lucrative but it has also its risks.
The risk is that stocks of this kind tend to drop much stronger than non-momentum stocks. It’s clear: what goes up must come down. And the higher you are the deeper your fall will be. Keep this in mind. This is a general stock investing rule.
Together with the sharp rise in price you can generally see a common thing. A rising price is mostly accompanied by a rising volume or a higher than average volume. If this happens this is a good sign for the stock to become a momentum stock.
An increase in volume indicates that more stock investors or traders get to know about this stock. The stock gains higher popularity and the word about it is faster spread around. Thus, more buyers jump on the bandwagon. After this the stock has already gained let’s say 80%, but now it can take off and go to about 150-300% or more.
You must bear in mind that momentum stocks are mostly low capitalization stocks of much under 1 billion $. Boarding the train in time that means before it already has taken off is difficult. But seeing a train already moving is possible.
What you must do is to find stocks that have the characteristics mentioned above: rising price and volume. These are generally also stocks which have hit their all-time-high, but that is not necessarily like this.
When you buy such a stock then please pay attention to the stop loss you set. You must set it immediately after your purchase; otherwise the sharp drop could kill you.
As you can see momentum stocks are a great alternative stock investing strategy with high risk and high return.
Stock Investing
The risk is that stocks of this kind tend to drop much stronger than non-momentum stocks. It’s clear: what goes up must come down. And the higher you are the deeper your fall will be. Keep this in mind. This is a general stock investing rule.
Together with the sharp rise in price you can generally see a common thing. A rising price is mostly accompanied by a rising volume or a higher than average volume. If this happens this is a good sign for the stock to become a momentum stock.
An increase in volume indicates that more stock investors or traders get to know about this stock. The stock gains higher popularity and the word about it is faster spread around. Thus, more buyers jump on the bandwagon. After this the stock has already gained let’s say 80%, but now it can take off and go to about 150-300% or more.
You must bear in mind that momentum stocks are mostly low capitalization stocks of much under 1 billion $. Boarding the train in time that means before it already has taken off is difficult. But seeing a train already moving is possible.
What you must do is to find stocks that have the characteristics mentioned above: rising price and volume. These are generally also stocks which have hit their all-time-high, but that is not necessarily like this.
When you buy such a stock then please pay attention to the stop loss you set. You must set it immediately after your purchase; otherwise the sharp drop could kill you.
As you can see momentum stocks are a great alternative stock investing strategy with high risk and high return.
Stock Investing
posted by jophan at
11:29 AM
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