Momentum trading carries high risk because trends can reverse abruptly, turning fast profits into devastating losses within minutes. Trends can abruptly reverse, leading to potential significant losses, and a single press release or fundamental shift can derail the entire setup.
The performance of momentum comes with the increased risk of occasional large crashes and major losses.
Tight stop losses and disciplined position sizing are the only real defense, since momentum indicators can give false signals in volatile markets and aren't guaranteed. Treat it as a short-term, skill-intensive strategy, not a passive bet.