When it comes to timing the stock market, there are generally 2 investment styles. One is to invest with the crowd and follow the momentum, hence named momentum investing. The other is to go against the crowd and do what everybody else is not doing, hence named contrarian investing. These 2 strategies are polar opposites; therefore you are either a momentum investor or contrarian investor.
Momentum Investing
Momentum investing is usually used by traders who move in and out of positions regularly. The basic idea is that once the market gains momentum in either direction, it will keep on moving towards that direction until the trend dictates otherwise. The strategy has it basis as when sentiment is very poor, the market will constantly get bombarded by bad news and the self-fulfilling prophecy will cause a complete loss of confidence in the market. Likewise, in a bull run, people typically forget ......