So basically here, you're chasing past winners.

You're looking for

stocks that have been delivering solid gains over a recent history.

Or indeed, a stock which has been just reversing a downtrend,

is starting to move around, and starting a new trend going up.

So this is the momentum investing.

We say those who invest along the strategy,

they called it, the trend is your friend.

But we can add, at least until the bend in the end, okay?

So that's the big, big problem of momentum investing.

Easier stay along.

You go, you go and go as the stock market increases.

If you're long or if short, if you're shorting the stock,

if you're selling it short, then the trend is down.

But at some point you need to exit, and we'll see in a minute what kind of

indicator we can look at it to find the good exit.

So a simple way to define momentum is to compare the closing price of today

with the closing price of say, the previous day or

better still maybe three or four days earlier.

So here we give you this formula, and we remain evasive

on the notion of what is the n.

N days ago, as you see in this formula.

So basically here your comparing two prices, today, and that of, n days ago.

And the n is basically for you to find.

Which strategy would work best?

And here I give you one example.

Here in this chart, you see on the bottom chart, the price evolution of the stock.

There's no name but it doesn't really matter which stock we're talking about,

you see the price evolution.

And on the top part of the chart in red, you see a momentum indicator, and

here it's defined exactly as we just said, you're comparing the price today.

And here it's not specified but

it's probably the price of three days earlier that we are comparing this to.

And as you can see, this line is basically is giving a very simple message.

When that line is above the horizontal zero line,

then it means that the momentum is positive.

It means that the closing price today is higher than the closing price say,

three days earlier.