hi everyone welcome to today's video so in the stock market what usually retail investors do is that they buy low and sell high this is very obvious for example if you buy ITC at 300 rupees and we will sell it off at 320 rupes so this is called as buying low selling high so this is the objective with which we operate what ends up happening is that we build it into our brain that we will only buy stocks when they are falling because we will get to purchase something at a discount and then it is very likely that it will go up and then we will sell it off and make money now there is nothing wrong with that strategy even I apply it a lot and I purchase many of my stocks using this strategy but there is another strategy that I use it is called as momentum trading strategy under this strategy what you do is that you buy something high and then you sell it when it goes higher now I'm going to explain this strategy in very simple easy to understand language and you don't need understanding of any technical indicators while applying this strategy people are charging lacks and lacks to teach such strategies on their technical courses if you do like the video do at least press the like button it will help these type of videos reach out to more people so with that said let us kick start our discussion and point number one is that we will quickly understand what momentum trading strategy is and what momentum investing strategy is now here is a picture of Richard dry house so he's considered as the father of momentum investing so to say and he made a lot of money using momentum investing on the flip side you have investors like Mr Warren Buffett Charlie M who do not believe too much in moment momentum trading or momentum investing so what is the theory behind the momentum investing let me explain that by using Nestle's example so if you take a look at nestl chart and if you would have purchased this stock at any of these points right any of these points for example you would have said that hey this has made a high this has made a high here this has made a higher you could have still exited this stock at Point number four and made money even if you would have decided to purchase nle at Point number four you could have sold this off at this new High Point number five or if you would have purchased nesle at Point number five you could have sold it off at Point number six so what are you doing you are buying high and selling higher this is what momentum trading and momentum investing is now what is the difference between momentum trading and momentum investing this is a very important point for you to understand as a retail investor because Traders or momentum Traders do not make a lot of money and there is hardly any study that has been done on momentum investing per se I do not know the data there whether they are making more money or less money but I will explain you some critical differences between these investing Styles and then you can make a call what you want to do now when it comes to momentum trading you genuinely do not bother too much about the underlying quality of the stock you are just going by the price of the stock if the stock of the price is rising and the technical indicators are telling you that you know what just purchase this K any stock and you buy it you trade the momentum you get out okay great so that's one way of making money but in case of momentum investing you are purchasing fundamentally good stocks so this is one key critical difference between momentum trading and momentum investing so please keep this Viewpoint in mind as we discuss the video now comes the second point that hey while doing this momentum trading or momentum investing there are a bunch of technical indicators like macd RSI bunch of different chart patterns volume analysis happens should you be doing it should you not be doing it it really depends on what your system is I will explain you some aspects of my system I can't put everything together in one single video that will get too long but I will explain what I do what my broad system is that is not the only system that you can follow you can pick other systems also but my system makes money for me so I'm explaining that to you so I hope these basic points are clear and a related third Point here is that what type of momentums are there so here let me pick the example of ITC and let me show you some critical points so here what you would see is that this is a very clear downward momentum this is a sideways momentum and this is an uptrend momentum now momentum can be judged from very shortterm long-term midterm and your head will hurt if you start studying all these things and start getting into excessive details so now let me help you simplify the framework that what are the things or practical things that you need to do in order to execute this strategy and make money from it so let me very quickly explain you the setup of this strategy so what you need to do is that you need to first and foremost identify whether the stock is trading at its 52 weeks High a classic case in point would happen somewhere in this Zone that here if you go back almost a year back nesle was trading at its alltime high and now it has made that previous high again so basically in Step One what is happening is that you must identify the 52 we high and that should be a repeat so that previous high should have been achieved at this previous point also Now 52 weeks is just an indicator please do not start creating Ras that hey it's only like 49 weeks or only 51 weeks no please don't do that please use a little bit of logic this is just an indicator so this is point one point number two now if the trade goes your way sell it at 30% gain so for example here you can categorically see that the stock gave a run up of roughly 32 33% sell it off go out but on the flip side something negative can also happen because the momentum can turn bearish so in such a scenario what might have happened is that you purchase this stock here and then it started falling so in such a scenario please get out of the stock at 15% loss so book the loss move away now you say that a how is this a guaranteed strategy no it is not a guaranteed strategy but this is mathematically sensible strategy because your risk reward is 2 is to one if the strategy wins you are going to make 2x money and if the strategy loses you are going to lose X money so from a mathematical point of view the strategy makes sense so let us test this out strategy again and see whether it actually works or not so let's say that this is 1 a and you got an opportunity to buy it at 1B you purchased it you made 30% profits here you sold it off now what about Point number two so again this has been a significant lag so here is the previous Peak 2 a you don't buy it here you buy it at 2B when it makes the the previous Peak again and did you make 30% gain again yes you made 30% gain roughly you should have sold it off and went out now do you purchase it here the answer is no you don't purchase it here because there has been no previous 52 weeks High that has been made at this particular Peak so we avoid it when do we purchase it again so we purchase at somewhere here so I'm marking it as 2C so what is happening here and when you should get out of nestle if you have purchase the stock so right now the stock has given roughly 7 7 and a half% return and when the stock gives approximately 30% returns I will be selling some portion of my nesle because I have purchased some bit of nesle using this strategy so now let me talk about final two points so a natural question comes that okay aad what type of stocks should we trade in by using this strategy you should only do it in fundamentally strong stocks now what is the definition of fundamentally strong stocks please continue to watch my videos you will learn a lot I also talk about it quite extensively on my stock market course in case you want to learn about it in a structured manner you could consider joining it but just so you don't make any major mistakes let me just open up screener and teach you how you can put some filters so at least you're not making a major major mistake here in terms of identifying forms so you go on screener and you type on screens and you create screen and then you go and type out this query so you can literally copy paste it so what this does is that this helps you companies that are trading at almost their 52 weeks High second it helps you identify companies where the market cap is more than 25,000 CR so these are fairly big companies and these are low debt companies so if you run this query you will at least get 60 70 odd companies which you can go and scan through this is not a perfect list you will have to refine it further using lot many parameters but at least this way you are not trading in some bad companies now comes the final point that hey what are the risks associated with this particular strategy okay so every strategy comes with its own set of risks the number one risk is that you will make a mistake in terms of identifying good assets many of you after watching this video I'm sure that you would apply this strategy in Penny Stock this stock that stock and then from next video onwards I'll get a lot of heat that you I applied this strategy in this stock I lost money you are to be blamed no I am not to be blamed I'm telling you very categorically that you should be applying this strategy only for good companies this is point one point two this is a mix of trading and investing so you are neither a Trader nor an investor here if you are a pure Trader pure investor please ignore this strategy please move on you don't need to learn this third key point you need to apply diversification in this strategy please do not put all your money on nesle because it is at that level please don't do that the reason why I short this video was fairly simple because markets are recovering and I can identify at least five really good stocks using these strategies you tell me in the comment box which good stocks are fitting this particular strategy what I will leave you with this that for example if you have to invest let's say one lakh rupees using this strategy at least subdivide that into 5 to 10 stocks finally how much money do I make using these type of strategies I do Fair bit of momentum trading and Investing For example when I'm purchasing mesle Hindustan unit L Etc it's not as if that it's pure like longterm I'm never going to sell it nothing like that if there are profit booking opportunities as per this strategy I would be doing it I hope you enjoyed the video please press the like button and I will see you soon