There is a theory that stock splits are a bullish sign in the stock market. The theory says that stocks that split occur because their stock has increased so rapidly that they need to lower their price in order for the average investor to be able to invest into it.

This means that the company should be a pretty strong company and the same momentum that carried them up to that high level before the split will likely push them back up to that level after the split.

It is a good theory and seems to work when you look at stock splits of the past, but even so it is just one thing to look at. Just because a stock split does not mean it is something that you should start buying with both hands, if it was then every company would start to split their stock in order to get all these crazy investors to jump on board.

Looking at a few other indicators can help an investor filter out good trades and bad trades is still a good idea. One of bigest indicators to look at is how the stock has actually performed in the past.

With momentum investing a trader attempts to get into stocks that are going up and hold onto them for as long as those stocks continues to go up. How does this apply to stock splits?

Well one thing I will do when I hear that a stock has split is to keep it on the side. Then I’ll watch the stock to see if they give ma a buy signal and they look like they are going to start making a big upward move.

If it does then it has the potential to be a very profitable trade. And the fact that the stock has just split may also work in my favor.

Trading Stock Splits can work out great, but they work better when combined with better investment strategies. This can help an investor put all of the odds in their favor.