| Momentum trading is caused when information on a | | | | same short period of time the stock could go up, it |
| stock is mentioned to the public and investors rush in | | | | can come right back down... as the first buyers begin |
| to buy the stock. This can happen because of | | | | to sell off. |
| newsletters, blogs, articles, press releases, email | | | | The only way to profit from momentum trading and |
| promotion, etc... Momentum investors look to make | | | | catch a hot penny stock is to place your buy as |
| money from quick price changes. They rush to buy | | | | soon as you receive the email. One way to protect |
| the stock when they receive the "tip" hoping to | | | | yourself is to use a limit order since the price changes |
| react before others. As other investors respond, the | | | | fast. Do not fall into the trap of chasing the price as |
| stock price goes up. Typically, the first few buyers | | | | it moves up. If you keep chasing the price and |
| will start selling the stock when the buying begins to | | | | happen to catch it towards the end of the run, you'll |
| slow down. This type of trading is very common with | | | | get in just as the first buyers begin to sell. |
| low priced penny stocks. | | | | Momentum trading is extremely risky but can be |
| Let's take the example of today's most common | | | | profitable if you are disciplined and don't get too |
| communication median... the email. An email is sent | | | | greedy. Decide exactly what price you're willing to |
| reaching 5000 investors covering a.10 penny stock. | | | | pay for the stock and stick to it. Once purchased, |
| This produces a rush to buy up the stock. Market | | | | immediately place your next trade by using a limit sell. |
| makers begin to raise their price because they do | | | | Again, do not let greed get the better part of you. |
| not have much supply of the stock and they see the | | | | Many investors hold on too long because they see |
| demand rising. Investors will see the price go up and | | | | the price going higher. You need to be one of the |
| they place orders quickly. And because this is a low | | | | few disciplined investors who can place a sell order 10 |
| price stock with few shares available, it takes little | | | | minutes later and walk away with a small profit. Stick |
| activity to send the stock higher. And just in the | | | | to this method and all the small profits will add up. |