Momentum investing is a strategy that involves “trading with the trend.” The concept behind momentum investing is that trends tend to stay in place for a period of time. And while stocks are riding that trend they tend to outperform the market.
This requires buying stocks that are rising and selling stocks that are declining. This is the opposite of conventional wisdom which states that that investors should buy stocks that are undervalued (and oversold) and sell stocks that are overvalued (and overbought).
Trading on momentum is a short-term strategy that can last as short as a few hours or days, but it will rarely extend beyond a few months. A key tactic to successful momentum investing is to identify trends, preferably before the trend is identified by mainstream investors. One way to do this is to identify media sentiment about a company and its stock.