PostHeaderIcon Momentum Trading Vs. Trend Following

Momentum trading is generally used to capture strong moves in short time frames usually for not more than a few hours or a few days. Generally momentum traders are very focused on only a few trades at a time at most and scan a large watch list for a few signals. Trend followers by contrast manage portfolios for entries and exits across diversified assets (usually future contracts) reacting to signals that allow them to capture the profits in long term trends and be on the right side of rare outlier events that lead to large profits through huge parabolic moves in one direction over a longer time period. 

Momentum is the  acceleration in a stock’s price that can be due to earnings, sentiment, news, greed, or fear. Momentum traders will  take a long or short position in the stock in the hope that its momentum will continue in either an upward or downward direction in the time frame they are trading. This strategy relies on short-term movements in a stock’s price rather than long term fundamental valuations. Momentum traders are trying to capture a strong move based on aggressive buyers or sellers bidding a price up or down by overwhelming one side of the bid/ask spread and setting off a strong move in one direction usually temporarily for hours or days.

“Trend following trading is reactive by nature. It does not forecast or predict markets or price levels. Prediction is impossible. Trend trading demands self-discipline to follow precise rules (no guessing or wild emotions). It involves a risk management system that uses current market price, the equity level in your account and current market volatility. Trend traders use an initial risk rule that determines position size at the time of entry. This means you know exactly how much to buy or sell based on how much money you have. Changes in price may lead to a gradual reduction or increase of your initial trade. On the other hand, adverse price movements may lead to an exit for your entire trade. Historically, A trend trader’s average profit per trade is significantly higher than the average loss per trade.”

“Trend trading is not a Holy Grail. It is not a passing fad or hyped-up secret black box either. Beyond mere rules, the human element is core. It takes discipline and emotional control to stick with trend trading through inevitable market ups and downs. Trend following seeks to capture the majority of a market trend, up or down, for profit. It aims for huge profits in all major asset classes — stocks, ETFs, LEAPS® options, bonds, currencies, futures and commodities.”

“Think of it this way: trend following is the only strategy that you could trade on a desert island. As long as you have market data each day, everything else is useless (i.e. CNBC, news, fundamentals, broker opinions, talking heads, etc.) for making the big money.” – Michael Covel

Above excerpt from

For more information on momentum trading.

PostHeaderIcon 10 Fast Facts About The Current Stock Market Environment $SPY $QQQ $IWM

  1. The long term uptrend stays in track as momentum slows and small pullbacks take  hold.

  2. Currently this market environment currently still favors buy and hold investors, trend followers of the long term uptrend, and swing traders from the long side during pullbacks. Buying strength or momentum on the indexes has just not worked for most of this year with all the fades and choppiness day by day.

  3. The short term support for the $SPY is the 21 day ema after that the 50 day sma is the next place buyers are probably waiting to buy the dip.

  4. The $QQQ bounced off the 10 day sma a loss of that level and the 21 day ema is the next level of support.

  5. The $IWM next level of support is the 200 day sma then the 30 RSI on the daily chart. Both very high probability entries.

  6. 100 Top Performing Stocks

  7. All Time Highs

  8. Stocks that bounced off their 50 day moving averages

  9. Stock Options Explain Doji Candles

  10. Stock Universe as of 07/26/2014






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After spending many years on twitter and facebook watching many traders in action I have to say these five traders are some of the very best I have every seen in real time over a long period of time. They are great at going with the flow of their trading time frame. They stay on the right side of trends and their win rates along with their maximizing of wins and minimizing of losses are just amazing to watch. These are some real deal trading denizens that we are fortunate to have them sharing either their wisdom or trades with the rest of us.

LM_Tentarelli @systemstrader95 Systematic Momentum trader, 16 years, Long/Short. Intermediate/Longer Term Momentum & Trend Following programs. Price only. No predictions or opinions.