Most traders, trade in stocks at exactly the wrong time, as they follow "buy low and sell high." "Bargain" stocks sitting at their 52-week lows can be a good investment. Buy low, sell high works well for investment but not necessarily a good idea for momentum trading.

For momentum trading real bargains are the stocks that are sitting at their 52-week highs. In a bull market, that 52-week high stock is twice as likely to deliver solid returns than the stock sitting at its 52-week low. Even in a bear market, the 52-week high stock is still nearly one-third more likely to perform well than the stock sitting at its 52-week low. That’s according to a recent study that examined more than 1,500 stocks across a 20-year period.

If you want to increase your chances of making money in trading, you need to "buy high" and "sell higher." This is basis of momentum trading. Research shows that stocks that have already outperformed the market over the past 12 months are likely to continue their winning ways, at least in the short term. And the reverse is true as well. Stocks that have performed poorly in the past 12 months are more likely to continue to do so. So to make money, you just find the list of stocks sitting at their 52-week high and buy them, right? Of course not. Because there are a lot of stocks on that 52-week high list that are about to take a dive.The secret to successful momentum trading is to separate the winners from the losers? The secret is knowing how to read the "herd." It’s figuring out when traders will continue to push a stock up or when they’re just as likely to drive it down. Key to making money on momentum is knowing how to take advantage of herding.