Momentum Trading Strategy: How to Ride Trends Without Getting Crushed

"The trend is your friend."

You've heard it a thousand times. And it's true. Until it isn't.

Because here's what they don't tell you: the trend is your friend until it ends. And when it ends, it ends fast. Violently. Taking your profits with it.

Momentum trading is about riding trends. But it's also about knowing when to get off.

What Momentum Trading Actually Is

Let me define it clearly.

Momentum trading is based on one simple idea: things that are going up tend to keep going up. Things that are going down tend to keep going down.

This is actually backed by research. Momentum is one of the few market anomalies that persists across different markets and time periods.

The strategy: buy strength, sell weakness. Don't try to pick bottoms. Don't try to call tops. Just ride the wave.

Sounds easy. It's not.

Why Momentum Trading Is Hard

Problem 1: Late Entries

By the time you confirm momentum, the move has already started. You're not buying the bottom. You're buying after the move is underway.

This means your entry is "expensive." If the move fails, you're underwater fast.

Problem 2: Whipsaws

Momentum can reverse quickly. What looked like a strong trend can turn into a choppy mess. You get stopped out. Then price continues in your original direction. Without you.

Problem 3: Knowing When to Exit

Momentum traders ride trends. But trends end. The question is: when do you get off?

Too early, you leave money on the table. Too late, you give back all your profits.

This is the hardest part. And there's no perfect answer.

My Momentum Trading Approach

After years of trial and error, here's what works for me.

1. Confirm the Trend First

I don't chase every green candle. I wait for trend confirmation.

My criteria:

• Higher highs and higher lows (for uptrend)
• Price above 20 EMA
• 20 EMA above 50 EMA
• RSI above 50

When all of these are true, I have a confirmed uptrend. Now I'm looking for entries.

2. Enter on Pullbacks, Not Breakouts

This is counterintuitive for momentum trading. But it works.

Instead of buying breakouts (late entry, wide stop), I buy pullbacks within the trend.

Price pulls back to 20 EMA? That's my entry zone. Bullish candle at the EMA? That's my trigger.

I'm still trading momentum. I'm just getting a better entry.

3. Trail Stops Aggressively

This is how I solve the exit problem.

I start with a fixed stop below the entry swing low. As price moves in my favor, I trail the stop.

My trailing method:

• Move stop to breakeven after 1R profit
• Trail stop below each new higher low
• Exit when price closes below 20 EMA

This lets winners run while protecting profits.

The Momentum Setup

Here's my actual strategy.

The Trend Pullback Entry

Conditions:

1. Confirmed uptrend (higher highs/lows, above EMAs)
2. Price pulls back to 20 EMA
3. RSI pulls back to 40-50 zone
4. Bullish candle forms at EMA

Entry: On bullish candle close Stop: Below the pullback low Target: Trail with trend

I set this up in dashpull as a conditional order. Trend confirmed + pullback to EMA + bullish candle = enter. The system watches. I don't need to.

Momentum Indicators

Which indicators actually help with momentum trading?

RSI

RSI above 50 = bullish momentum. RSI below 50 = bearish momentum.

Simple trend filter. I don't trade longs when RSI is below 50.

ADX

ADX measures trend strength. Above 25 = strong trend. Below 20 = weak/no trend.

I only take momentum trades when ADX is above 25. Otherwise, I'm trading a range, not a trend.

Moving Averages

Price above 20 EMA = short-term bullish. 20 EMA above 50 EMA = medium-term bullish.

EMAs show me the trend direction. Pullbacks to EMAs give me entries.

The Momentum Mindset

Momentum trading requires a specific mindset.

Accept Late Entries

You're not buying bottoms. You're buying after the move starts. That's okay. That's the strategy.

Don't feel bad about "missing" the first part of the move. You're trading confirmation, not prediction.

Accept Whipsaws

Some trades will get stopped out and then work. That's the cost of using stops.

The alternative—not using stops—is worse. Much worse.

Let Winners Run

This is the hardest part.

When you're up 3R, the temptation to take profit is overwhelming. But momentum trades can go 5R, 10R, even 20R.

Trail your stop. Let the market take you out. Don't cut winners short.

Common Momentum Mistakes

Mistake 1: Chasing Extended Moves

Price has gone up 20% in a week. "It's got momentum!"

Maybe. Or maybe it's exhausted and about to correct.

I don't chase extended moves. I wait for pullbacks. Even in strong trends.

Mistake 2: Fighting the Trend

"It's gone up too much. Time to short."

No. Trends can extend far beyond what seems reasonable. Don't fight them.

If the trend is up, look for longs. Period.

Mistake 3: No Trailing Stop

Taking a fixed profit target defeats the purpose of momentum trading.

The whole point is to ride big moves. You can't do that with a 2:1 target.

Trail your stop. Let winners run.

Mistake 4: Trading Choppy Markets

Momentum trading works in trending markets. It fails in choppy, range-bound markets.

Check ADX. If it's below 20, there's no trend. Don't force momentum trades.

Momentum in Different Timeframes

Momentum works on all timeframes. But the character is different.

Daily/Weekly: Smoother trends, fewer whipsaws, bigger moves. Best for swing trading.

4H/1H: More opportunities, more noise, smaller moves. Good for active trading.

15m/5m: Lots of noise, frequent whipsaws, small moves. Difficult to trade.

I focus on 4H and daily for momentum trades. Lower timeframes are too noisy.

Automating Momentum Trades

Here's how I use dashpull for momentum trading.

Entry conditions:

• Price above 20 EMA
• 20 EMA above 50 EMA
• Price within 1% of 20 EMA (pullback)
• RSI between 45-55
• Bullish candle forms

Exit conditions:

• Stop loss: Below pullback low
• Trailing stop: Below each new swing low

The system monitors for pullbacks in confirmed trends. When conditions align, it enters. I manage the trailing stop manually or set predefined levels.

The Bottom Line

Momentum trading is simple in concept. Hard in execution.

The key insights:

• Confirm the trend before trading
• Enter on pullbacks, not breakouts
• Trail stops to let winners run
• Accept whipsaws as cost of doing business
• Don't trade momentum in choppy markets

dashpull helps me execute momentum trades systematically. Define the conditions. Let the system watch. Enter when everything aligns.

The trend is your friend. But only if you trade it correctly.

Ready to automate your momentum strategy? Try dashpull →