Momentum Trading: Don't Blame All Market Volatility on Daytraders

Excuse me as I climb on my soapbox. Don't worry, I won't give you a lecture, but before I tell you any more about the details of my life as a daytrader, I have to address the critics. They say momentum trading is just a passing fad. They're wrong! They don't understand. Love us or hate us, momentum traders are here to stay. Why? Because momentum is in the market, and it's bigger than all of us.

How can I say this with such confidence? Let me explain. Whenever something volatile happens in the market, experts accuse the daytraders. It's easy to say that all the volatility is caused by daytraders. Most investors don't understand where momentum comes from, and when they see something really moving, they assume it's daytraders.

As a daytrader, it is imperative for me to understand where the momentum a stock is showing comes from before I decide to buy. The way a stock reacts to momentum depends on who's causing that momentum. There are many causes of momentum, but the three main groups of momentum-makers are institutions, daytraders and individual investors. ...