Section 4 · Momentum Basics
What is Momentum Trading?
Riding stocks already in motion with a reason to keep moving
Buy What's Already Moving
Momentum trading is the strategy of buying stocks that are already moving fast — and have a concrete reason (a catalyst) to keep moving. Unlike value investing, which seeks cheap stocks, momentum trading seeks strong stocks getting stronger. The fundamental insight is Newton's First Law applied to markets: a stock in motion tends to stay in motion. The edge in momentum trading is concentrated in short windows of explosive movement — often the first 30-60 minutes of the trading day when news-driven stocks gap up and attract follow-through buying from traders and algorithms. Momentum traders do not hold positions for weeks or months; they hold for minutes to days, capturing the initial explosive surge of a catalyst-driven move. Risk is strictly defined: you always know your maximum loss before you enter, and you cut losses the moment a trade moves against your plan.
3 things to know
Momentum trading: buying stocks already moving fast with a catalyst driving the move
The edge concentrates in the first 30-60 minutes of the trading day for intraday momentum
Risk is always pre-defined — know your maximum loss before entering any position
Dive Deeper
The trend is your friend until the end when it bends. In momentum trading, your only job is to find the trend early, ride it with defined risk, and exit before everyone else does.
Mark Minervini, four-time U.S. Investing Champion
Key vocabulary — tap each card
Did you know?
"I always define my risk before I get into a trade. If I can't find a place to put my stop that makes sense, I don't take the trade." — Paul Tudor Jones, hedge fund legend and momentum trader