Before we jump onto what is momentum triggered trading, let us try to understand what is 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 criterion, is called a triggered trading. So whenever there is some instance of a happening as specified by the trader, the automated bots themselves undertake and complete the transactions, without requiring any inputs from the trader.
Momentum Triggered Trading is also a king of triggered trading; let us look into some more details.
What is Momentum Triggered Trading
In case of Momentum Triggered Trading, the investors buy and sell, with triggers, which are based upon the recent trends/momentums in the prices of the cryptocurrency. The investors very practically apply this phenomenon of physics to finance, where they speculate that a trend of price movement would continue to follow for at least some time. As 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 triggered trading, believe and bet on the fact that a strong price movement in one direction, would 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, but it 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 classifying, 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, but only 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.
Although what is Momentum Triggered Trading is very easy to understand as a concept, and also makes your life much easier as an investor, however it requires enough skill and practice before you can earn from this principle in cryptocurrency market. Also there are many momentum indicators available in the market some free and some paid, which can be used for this purpose.