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Finance Dictionary and Glossary of Investment Terms
Momentum
Definition 1.
The rate of acceleration of a security's price or volume.
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Definition 2.
The amount of acceleration of an economic, price, or volume movement. A trader who follows a movement strategy will purchase stocks that have recently risen in price.
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Definition 3.
The perceived strength behind a price movement. Momentum investors seek to take advantage of upward or downward trends in stock prices or earnings. They believe that these stocks will continue to head in the same direction because of the momentum that is already behind them. The idea relies on the belief that there are a large number of investors in the market who will buy whatever stock is already hot. Momentum investors do not necessarily believe that momentum stocks will do well in the long run, but they do think that in the short run people will continue to buy them as they have in the immediate past. This therefore involves market timing which is very risky.
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Definition 4.
The underlying power or thrust behind an upward or downward price movement. Momentum is represented on a chart as a line that is continually fluctuating above and below a horizontal equilibrium level that represents the halfway point between the extreme readings. Momentum is a generic term embracing many different technical indicators, such as the RelativeThe underlying power or thrust behind an upward or downward price movement. Momentum is represented on a chart as a line that is continually fluctuating above and below a horizontal equilibrium level that represents the halfway point between the extreme readings. Momentum is a generic term embracing many different technical indicators, such as the Relative Strength Index and Stochastic Oscillators.
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