Before we jump onto what momentum triggered trading, let’s try to understand what triggered trading in the first place. Any trade that can be automated, initiated and then transacted without further inputs from a trader when the market meets some specified criteria is called a triggered trading. So whenever there is an instance of an incident as specified by the trader, the automated bots themselves undertake and complete the transactions without requiring any input from the trader.
Momentum Triggered Trading is also the king of triggered trading; let us look into some more details.
What is Momentum Triggered Trading
In the case of Momentum Triggered Trading, investors buy and sell with triggers based upon recent trends/momentums in the price of the cryptocurrency. Investors very practically apply this phenomenon of physics to finance, where they speculate that the trend of price movement will continue to follow for at least some time. As it is mass multiplied by velocity used to determine the path of a trajectory, so is the recent price trend of some cryptocurrency used in momentum triggered trading to determine the future price of some cryptocurrency.
So basically such traders who deal in momentum trigger trading believe and bet on the fact that a strong price movement in one direction will continue to follow until there is some visible weakness in the movement. This is kind of entering into short and long positions, based upon the current market price and the strength of the current market price.
How to Twist Momentum Triggered Trading to Your Benefit
Although momentum triggered trading seems close to a pairs trading system, that is not the case. The two are totally different concepts, although they have some overlapping concepts. Momentum Triggered Trading requires more statistics than market knowledge. If you can come up with a great model on how a particular cryptocurrency has been doing in the past, you can predict the future trend and enter into a Momentum Triggered Trade. Therefore, Momentum Triggered Trading requires expert financial consultants so as to have the maximum benefit as a trader. It is advisable to go in for companies like executium.com who excel in such advanced decisions related to cryptocurrency.
Types of Momentum Triggered Trading
Broadly classified, there are two types of momentum triggered trading forms.
1. Absolute: In this case, only one particular cryptocurrency is used, and the historical data and the forecasted data for that particular one are analyzed.
2. Relative: In this case, more than one, cryptocurrencies are used, for example comparing Bitcoin with Altcoin, and the decision whether or not to enter a Momentum Triggered Trade is based upon this.
While what Momentum Triggered Trading is very easy to understand as a concept and also makes your life much easier as an investor, it requires enough skill and practice before you can earn from this principle in the cryptocurrency market. There are also many momentum indicators available in the market, some free and some paid, which can be used for this purpose.