Momentum Investing

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Investing in the stock market is often related to riding a roller coaster. There are climbs to the tops that inevitably lead to a downward drop. Our adrenaline will spike out of fear or excitement as we go up and down. Capitalizing on the rides up and drops is exactly the goal of momentum investing


The principles of momentum investing are quite simple. As the roller coaster goes up, we buy the stock to capitalize on the appreciation. When we reach a point before the drop, we can short the stock to make money off the downward trend. Then repeat. However, it's not always that simple. 


Determining when to buy or sell, called entry and exit points, is the most important aspect of the momentum investing strategy. Strong entry and exit points may lead to stronger returns. To help investors make this difficult decision easier, they can use indicators and technical analysis to discover when to jump on the ride. 


Momentum investing is not a widely used strategy due to its less predictable results. Succeeding using this strategy requires a high level of time commitment and experience to accomplish. Earnings profits will only come if an investor is able to get in and out at suitable times. If an investor fails to, it could lead to large losses.

Source: Investopedia | Momentum Investing

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Disclosure: Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security's eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on principal or riskless principal basis, and can only be bought or sold with market orders during market orders.
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This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Alpaca is not registered (Alpaca is registered only in the United States).

View Alpaca's disclosures at: https://alpaca.markets/disclosures

Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security’s eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on a principal or riskless principal basis, and can only be bought or sold with market orders during normal market hours.

The content on this website is for illustrative and informational purposes only and any historical returns, expected returns or projections are hypothetical in nature. Investing involves risk & investments may lose value, including the loss of principal. Past performance does not guarantee future returns or results. Before investing, carefully consider your investment objectives, time horizon, and overall risk tolerance as well as the information stated in the product offering prospectuses.