Momentum trading is a strategy focused on capitalizing on the continuance of existing trends in the market. Traders who employ this approach seek to identify assets that are displaying strong price movements and typically buy those that are trending upwards while selling those that are trending downwards. The underlying principle is that assets that have performed well in the past will continue to do so in the near term, and vice versa. Momentum traders often use technical indicators, such as moving averages or the Relative Strength Index (RSI), to identify potential entry and exit points. This trading strategy is common across various markets, including stocks, forex, and commodities, but it requires active monitoring and risk management due to market volatility.
