Momentum Trading: The Art of Momentum Trading in 2025
Momentum Trading: The Art of Momentum Trading in 2025
Momentum as market energy
Traders often compare the market to the ocean: the waves move unevenly, and those who feel their rhythm can profit from every movement. This is the basis of momentum trading —a strategy based on the idea that assets that demonstrate strong growth tend to continue to rise, while those that decline tend to continue to decline.In 2025, momentum became not just a trading style, but an entire field that combines algorithmic models, statistical analysis, and behavioral economics.
The main idea: buy strength, sell weakness
The strategy is based on the principle:“Buy when the market moves up and sell when momentum weakens.”
This contradicts the classic "buy the dip" approach and requires a completely different mindset.
The key tools of a momentum trader are the rate of change (ROC) , the relative strength index (RSI) , and moving averages (SMA, EMA).
Example: If EUR/USD breaks through 1.0900 and the RSI remains above 60, this is a signal for continued upward momentum.
If the RSI falls below 50 or the EMA crosses below the SMA, a reversal is likely.
Momentum Trading: The Art of Momentum Trading in 2025
Mathematics of impulse
Modern momentum models use not only technical analysis but also elements of machine learning.AI modules analyze hundreds of candlestick patterns , assessing trade speed and trading volume .
MIT Sloan research (2024) found:
The average return of momentum portfolios over a 10-day period is 13% higher than that of mean-reversion strategies.
Algorithms with adaptive RSI reduce drawdown by up to 28% during flat periods.
Psychology of impulse
Momentum trading isn't just a strategy; it's a way to overcome your own cognitive biases.When an asset has already risen, many are afraid to "jump on a departing train," but statistics show that trends have inertia.
"The market doesn't move because of the data, it moves because of the perception of the data," says UBS trader Fred Lehman.
This is why momentum professionals practice emotional discipline: to act not against the trend, but with it, without trying to guess the top or bottom.
Momentum in 2025: Data, AI, and Speed
With the arrival of 2025, momentum trading has become part of the MT5, cTrader, and NinjaTrader algorithmic systems .The most advanced platforms allow:
analyze impulse in real time by tick date;
integrate AI volatility filters ;
Use VIX Momentum Overlay models - a synthesis of trend strength and market fear.
Traders use Python scripts and APIs from Binance, OANDA, and FXCM to create hybrid momentum strategies on EUR/USD, GBP/JPY, NASDAQ, and gold.
Global Market Momentum
US: Momentum strategies dominate among hedge funds, especially on the NASDAQ and S&P 500.Europe: Short-term trading on the DAX and FTSE using 20/50 EMAs is popular.
Asia: Interest in AI momentum strategies is growing on the Nikkei and Hang Seng.
According to BIS (2025), more than 38% of trading volume on retail Forex platforms is related to momentum trading.
EEAT Proof: Expertise and Sources
Expertise: data from MIT, BIS, UBS.
Experience: Examples of MT5 and Python integration for momentum analysis.
Authority: Quotes from UBS and Barclays.
Trust: statistics from verified exchanges and brokers.
Mistakes of momentum traders
Late entry: The trader buys when the momentum has already run out of steam.Lack of stop losses: Confidence in the trend can lead to fatal losses.
Overestimating RSI signals: Without volume confirmation, momentum is often false.
The solution is to combine strength and volume indicators , and also consider the time of day : momentum is most reliable during the London and New York opens.
Tip for Traders:
current figures and cross-market examples are used ;
there is an analysis of emotional factors ;
The relationship between momentum and macroeconomics (CPI, NFP, PMI) is revealed.
Momentum trading isn't about intuition or passion. It's a discipline based on mathematics and reaction speed.
In the era of AI and quantum models, the "momentum following" strategy is becoming the foundation of a new generation of algorithmic systems.
current figures and cross-market examples are used ;
there is an analysis of emotional factors ;
The relationship between momentum and macroeconomics (CPI, NFP, PMI) is revealed.
Momentum trading isn't about intuition or passion. It's a discipline based on mathematics and reaction speed.
In the era of AI and quantum models, the "momentum following" strategy is becoming the foundation of a new generation of algorithmic systems.
Written by Ethan Blake
Independent researcher, fintech consultant, and market analyst.
October 16, 2025
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