Momentum Investing in Australia 2025: Strategy, Trends & Tips

Momentum investing has long been a favourite tactic among savvy traders, but in 2025, it’s increasingly moving into the mainstream for Australian investors. With markets more accessible than ever and technology providing rapid access to data, everyday Aussies are asking: can you really profit by buying what’s already going up? Let’s dive deep into what momentum investing means in the current Australian context, how recent policy changes affect the landscape, and what practical steps investors can take to ride the momentum wave without wiping out.

What Is Momentum Investing?

Momentum investing is a strategy that capitalises on the continuation of existing trends in the market. The basic premise: assets that have performed well recently will likely keep performing well in the short to medium term, while underperformers will continue to lag. Rather than hunting for undervalued gems, momentum investors focus on stocks, ETFs, or sectors that are already outperforming their peers.

In Australia, momentum investing has historically been overshadowed by value and income strategies, but the tide is turning. The ASX’s increasing digitisation, the proliferation of thematic ETFs, and improved access to international markets are making momentum trading more accessible than ever.

• Example: In 2024, lithium and green energy stocks on the ASX saw explosive gains. Momentum investors who jumped in early captured outsized returns as these trends accelerated.
• Key tools: Many investors use technical indicators like moving averages, relative strength index (RSI), and price breakout patterns to spot momentum plays.

2025 Policy Updates: What’s Changing for Momentum Investors?

Several regulatory and market developments in 2025 are shaping the landscape for momentum investing in Australia:

• ASIC’s Digital Platform Oversight: The Australian Securities and Investments Commission (ASIC) has rolled out enhanced oversight of trading platforms, especially those offering leverage and algorithmic trading. Retail investors now face stricter disclosure requirements, but also benefit from improved transparency and real-time data feeds.
• Taxation of Short-Term Gains: The ATO’s 2025 tax guidance reiterates that profits from short-term trades—including those from momentum strategies—are classified as income, not capital gains. This has major implications for after-tax returns, especially for high-frequency traders.
• ESG and Thematic Momentum: New rules around ESG (Environmental, Social, and Governance) disclosures mean that sectors like clean energy and sustainable tech are seeing clearer reporting and sharper price trends, creating fertile ground for momentum strategies.

For Australian investors, these updates mean it’s crucial to stay informed not just about market trends, but also about the legal and tax frameworks that can affect your bottom line.

How to Harness Momentum Investing in 2025

While the basic principles of momentum investing remain timeless, the tools and tactics for success are rapidly evolving. Here’s how you can get started—or refine your approach—in 2025:

1. Use Modern Tools and Data

• Trading platforms: Apps like SelfWealth, Stake, and CommSec now offer advanced charting and watchlist features designed for momentum traders.
• Automated alerts: Set up automated price or volume alerts to flag when a stock breaks out of its recent range—these can help you act swiftly without staring at screens all day.
• Follow sector trends: ASX sector indices and thematic ETFs (e.g., battery tech, AI, renewables) make it easier to ride broader waves, rather than picking individual winners.

2. Manage Risk Ruthlessly

• Set stop-loss orders: Momentum can reverse quickly. Pre-set stop losses help lock in gains and limit downside.
• Size your positions: Don’t bet the house on a single trend. Diversify across sectors and asset classes to smooth your returns.
• Watch the liquidity: Focus on stocks or ETFs with strong trading volumes—thinly traded assets can trap you when momentum fades.

3. Understand the Tax and Policy Implications

• Track your holding periods: Most momentum trades are short-term, so expect to pay income tax rates, not the discounted CGT. Keep records to avoid end-of-financial-year headaches.
• Review ASIC updates: Regulations on algorithmic trading, leverage, and disclosures are evolving. Stay up to date to avoid compliance pitfalls.

Real-World Example: Momentum in Action

Consider the Australian tech sector in early 2025. After a sluggish 2023–24, AI and cybersecurity stocks surged on the back of government digital infrastructure spending and global M&A activity. ETFs tracking these sectors, such as BetaShares Australian Technology ETF (ASX: ATEC), saw significant inflows and rapid price appreciation. Momentum investors who identified the trend early, set disciplined exits, and managed tax implications captured impressive returns—while latecomers or those ignoring risk controls faced sharp reversals when the sector cooled.

Conclusion: Is Momentum Investing Right for You?

Momentum investing isn’t about chasing every hot stock—it’s about identifying sustainable trends, acting decisively, and managing risk with discipline. In 2025, Australia’s market offers unprecedented opportunities for those willing to embrace data-driven tools, understand policy shifts, and stay agile. Whether you’re a seasoned trader or a curious beginner, momentum strategies can be a powerful addition to your investment toolkit.