Practitioner course in discretionary trading
Momentum and Breakout Trading
Momentum trading buys what has been rising and sells what has been falling, one of the best-documented effects in finance. This course covers the research on time-series and cross-sectional momentum, breakout entries, exits that let trends run, the sharp reversals called momentum crashes, and how to run a manual momentum book.
Momentum trading rests on one of the most robust findings in market research: assets that have risen over the past months tend to keep rising for a while, and those that have fallen tend to keep falling. Breakouts are the trader’s way of entering that move. This course teaches the evidence and the method together, including the painful parts.
What is momentum trading?
Buying assets that have performed well recently and selling, or avoiding, those that have performed poorly, in the expectation that the move continues. Researchers distinguish time-series momentum, a market against its own past, from cross-sectional momentum, markets ranked against each other. The course has you run both by hand.
Why do so many breakout traders lose money?
Because most breakouts fail and the profits come from a few large trends. Traders who take profits early or abandon the method after a run of small losses miss the trades that pay for everything else. The course shows you the typical pattern of results in advance, so the losing runs do not surprise you.
Who is this course for?
Swing and position traders who want a method with strong evidence behind it. No programming is needed.
What you will be able to do
- Summarise the evidence on time-series and cross-sectional momentum across markets and decades.
- Define breakout entries and trend exits by rule, on daily and weekly charts.
- Explain momentum crashes and size a momentum book to survive them.
- Run and review a manual momentum portfolio over a simulated twelve weeks.
Syllabus, module by module
The evidence
Time-series and cross-sectional momentum, and why the effect has persisted.
Breakout entries
Channel breakouts, new highs and volatility breakouts, defined by rule.
Exits that let trends run
Trailing stops, time exits and why most of the profit comes from a few trades.
Ranking markets
Choosing the strongest stocks or futures by a simple measure you can update by hand.
Momentum crashes
Sharp reversals after market bottoms, and how volatility sizing limits the damage.
Running a momentum book
Diversification, correlation and the long losing periods every trend trader faces.
How the certificate is earned
Weekly exercises and two graded problem sets: a hand-run momentum ranking of thirty stocks or futures, and a twelve-week simulated momentum book with a review. On a pass you receive the Course certificate in Momentum Trading, issued by the Institute with a verification code. Read how certification works.
Before you start
Price Action Trading and Market Structure and Evidence-Based Trading: Scientific Thinking for Traders.
This course counts toward
- Advanced Certificate in TradingThe third semester of the trader path, for a certified trader at advanced level: order flow, futures, momentum and breakouts, global macro, fundamental analysis, how desk traders think, prop trading firms and overtrading, with a desk-style simulated book as the capstone. No programming.
- Diploma in Professional TradingThe top credential on the trader path and the Institute's trading certification for people who do not write code. Three semesters, 24 courses and a 160-hour capstone, from a first lesson on how markets work to a six-month simulated trading business reviewed like a desk.
Questions applicants ask
Does momentum trading still work?
Momentum has been documented in stocks, bonds, currencies and commodities over more than a century of data, though with long weak periods and occasional crashes. The course teaches the evidence and its weak periods together, so that you can stay with a method through a bad year or decide to leave it for a stated reason.
Is momentum trading the same as trend following?
They overlap. Trend following usually means time-series momentum: trading each market in the direction of its own trend. Cross-sectional momentum compares markets with each other. The course covers both.