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One investing strategy that is often ignored is momentum investing. It is a strategy that can make huge percentage point gains and has been proven to produce magnificent gains in the past.

So, what is it? Unlike conventional investing where the goal is to buy low and sell high momentum investing is the strategy of buying high and selling higher. Instead of trying to find great bargains in the stock market it attempts to find stocks that are continuously making new highs and get into them assuming that the trend is likely to continue.

I have personally seen how powerful this strategy can be. A stock that is trending up and making higher highs will likely keep trending up and keep making new highs for a long time. It is not unheard of for a stock which has just doubled in price last year to double again the next year.

Of course this does have two sides to it. If a stock has moved up too much there is a lot of room for it to fall. A $300 stock can fall a lot further then a $2 stock after all.

Because of this it can be a good idea to actively manage every trade. Instead of waiting in a stock for the highs and lows, selling at the first sign of weakness and attempting to hold onto it only as it continues to go up can have impressive results.

While momentum investing is not for everyone here are some stock tips to help you make the most of it.

1. Develop a System

If you are trading the market you can no longer just buy a random stock, cross your fingers and hope that everything works out ok in the end. Instead creating a system which has precise entry and exit point is the only way to get any consistency in your trading results.

2. Cut Losses

If a stock goes against you, that means that you where wrong. There is no need to let the stock fall down 60% or more before you decide it was a bad trade. Instead getting out at the first sign of weakness allows you to save your money and keep any profits you do have.

3. Control Your Emotions

Emotions will sometimes get the better of you when trading. in the stock market. There were many times when I was up 20% on a position and I just want to get out of the trade, at least I know I have made money after all.

But more often than not going with your “gut” will lead you to large losses. This is another reason why it is important to develop your own trading rules. If you have specific guideline to follow when entering or exiting a trade it will help save you from making a bad, spur of the moment decision that you will later regret.

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