Momentum Trading

What is Momentum Trading?

Momentum trading is a trading method that takes advantage of cryptocurrency volatility. They invest in assets when they notice an uptrend beginning and sell at the peak of the trend before it reverses. Scalpers and day traders frequently employ the momentum trading approach. However, considering its effectiveness, momentum trading is also used by long-term traders.

Three elements, volatility, volume, and period, are necessary for momentum trading to be successful.

A trader can use an asset's 24-hour volume to estimate its price movement. The supply and demand of the asset increase with volume. Price increases are a result of high demand. On the other hand, a falling price trend indicates a weak demand for the asset. The uptrend must be present in various time frames, including 15m, 30m, 1hr, 4hr, and 24hr. A running decline may be present if an uptrend is only apparent in a single time frame.