Momentum Investing 101

Algorithmic trading, simply put, uses computers that are programmed to take specific steps in response to the market data it is receiving. There are many algorithmic trading strategies that are used for a variety of reasons by financial advisors and investors who are looking for portfolio returns while taking risk out of the equation. Some of the strategies are focused on long-term returns while others are tailored for short-term returns.

We at AlpaDroid use various algorithmic trading strategies to help predict the market by following trends. In this blog, we will take a deeper dive into one of the strategies, momentum investing, to give some insight into one of the most basic trading systems used by financial advisors and investors. For additional information about the trading strategies used at AlphaDroid, check out our website or contact us today.

What Is Momentum Investing?

Momentum investing is one of the most common algorithmic trading systems that is followed by investors. As its name suggests, momentum investing looks for the market trend to move significantly in one direction on high volume. Traders using this technique bet that an asset price moving strongly in a certain direction will continue to move in the same direction until the trend begins to weaken. This strategy can either be very simple and straightforward, or it can be extremely difficult. Have questions or want to learn more? Contact our AlphaDroid team or start your 30-day free trial of our software today!

Simple Momentum Investing Strategy

An example of a simple approach to the momentum investing strategy is investing in the five best performing shares in an index that is based on a 12-month performance. If the trends are showing strong performance, an investor will continue to ride the trend while selling stocks that have underperformed during that same period.

Complex Momentum Strategy

While momentum investing strategies can be relatively simple, they do have the potential to become more complex and complicated. For instance, a more difficult strategy using this technique could consist of blending momentum over a longer period of time. By doing this, the use of relative and absolute momentum comes into play. Investors are then able to rebalance the momentum systems weekly, monthly, quarterly, or even yearly as desired.

AlphaDroid’s Approach To Algorithmic Trading

AlphaDroid is an elite investment portfolio management tool that uses a combination of trading strategies to help predict the market by following the different trends. These strategies can be used to help financial advisors and investors analyze, build, and compare investment portfolios. By using AlphaDroid, investors have the opportunity to optimize results by moving to wherever the money is flowing.

AlphaDroid levels the playing field with Wall Street by putting the power of award-winning investment algorithms in your hands. If you are interested in learning more about AlphaDroid or want more information on how it can help investors reap big returns, visit our website today or give us a call. Our professional staff is available to explain our approach in more depth and answer any questions you have.