Momentum trading is a strategy rooted in the idea that assets showing strong recent performance will continue to move in the same direction for a period due to market inertia. The primary principles behind momentum trading are as follows:

1. Trend Following: Momentum traders capitalize on sustained price trends. The strategy assumes that "the trend is your friend," leveraging upward or downward movements to make profits.

2. Market Sentiment: Momentum trading thrives on investor behaviour and market psychology. Positive news, earnings reports, or economic conditions can amplify demand for an asset, driving its price higher.

3. Volume Confirmation: High trading volume often confirms the strength of a price movement. Momentum traders monitor volume to ensure that market interest supports the trend.

4. Relative Strength: Traders look for assets that outperform others in the same category. Relative strength indicators help identify potential candidates for momentum trades.

5. Risk Management: Momentum trading involves significant risks, as trends can reverse unexpectedly. Traders use tools like stop-loss orders and position sizing to minimize potential losses.

By combining these principles with technical analysis, momentum traders aim to enter positions early in a trend and exit before it lose momentum, maximizing potential gains.