Momentum Strategy Introduction: Identifying and Following Trends
Momentum Strategy Introduction
What Is Momentum?
Momentum refers to the speed and direction of an asset's price change over time. The core assumption: assets that have performed strongly tend to continue performing strongly in the near future.
Types of Momentum Strategies
| Type | Description | Holding Period |
|---|---|---|
| Time-Series Momentum | Asset's own trend | 1-12 months |
| Cross-Sectional Momentum | Performance relative to peers | 3-12 months |
| Short-Term Momentum | Intraday or multi-day price inertia | 1-5 days |
Common Momentum Indicators
- Moving Averages — Price above MA = uptrend
- RSI — Measures momentum strength
- MACD — Trend direction and momentum changes
- ROC (Rate of Change) — Percentage price change
Simple Momentum Strategy Example
Dual Moving Average Crossover:
- Buy when MA20 crosses above MA50 (golden cross)
- Sell when MA20 crosses below MA50 (death cross)
Risks of Momentum Strategies
- Reversal Risk — Trends can reverse suddenly
- Transaction Costs — Frequent trading increases costs
- Overfitting — Backtested results may not apply to future markets
Use Momentum on AlphaDesk HK
- 📊 Backtesting [blocked] — Test momentum strategies with historical data
- 📈 Technical Indicators [blocked] — MA, RSI, MACD and more
- 🧠 AI Analysis [blocked] — AI identifies momentum shifts
Disclaimer: Past performance does not guarantee future returns. This article is for educational purposes only.
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