momentum-trading

---
name: momentum-trading
description: Trade strong directional price moves with momentum confirmation. Use when riding breakouts, trading trend continuation, or capitalizing on news-driven moves.
---

# Momentum Trading

Momentum trading capitalizes on strong directional price moves, entering when momentum is confirmed.

## Momentum Identification

### Indicators

- RSI breaking above 50 (bullish) or below 50 (bearish)
- MACD histogram expanding
- Volume surge (2x+ average)
- Candle size increasing

### Price Action

- Higher highs/higher lows accelerating
- Breaking through resistance/support
- Gap openings in direction

## Entry Strategies

### 1. Breakout Momentum

1. Identify consolidation/resistance
2. Wait for breakout with volume
3. Enter on breakout candle close
4. Stop below breakout level

### 2. Retracement Momentum

1. Identify strong momentum move
2. Wait for shallow pullback (38-50%)
3. Enter on pullback completion
4. Stop below pullback low

### 3. Momentum Continuation

1. Already in trend
2. Momentum indicator confirms continuation
3. Add to position or re-enter
4. Trail stops

## Exit Rules

### Take Profit When:

- Momentum indicator diverges
- Volume decreases significantly
- Price reaches resistance
- R:R target achieved

### Stop Loss When:

- Momentum reverses
- Structure breaks
- Pre-defined stop hit

## Best Settings

| Indicator | Settings | Signal              |
| --------- | -------- | ------------------- |
| RSI       | 14       | Cross 50            |
| MACD      | 12,26,9  | Histogram expanding |
| Volume    | 20 MA    | 2x+ average         |

## Workflow

1. **Screen for momentum** (stocks/crypto making moves)
2. **Confirm with volume** (must be above average)
3. **Wait for entry** (breakout or pullback)
4. **Manage position** (trail stops, scale out)
5. **Exit on exhaustion**

## Avoid These Mistakes

- Chasing extended moves
- Entering without volume confirmation
- Fighting the momentum direction
- Holding through momentum reversal