what is momentum 
momentum is the rate of acceleration of a security s price that is the speed at which the price is changing momentum trading is a strategy that seeks to capitalize on momentum to enter a trend as it is picking up steam simply put momentum refers to the inertia of a price trend to continue either rising or falling for a particular length of time usually taking into account both price and volume information in technical analysis momentum is often measured via an oscillator and is used to help identify trends understanding momentumthink of it as the momentum of a train when a train starts up as it accelerates it moves very slowly once it gets up to speed it stops accelerating but remains traveling at a higher velocity at the end of the trip the train decelerates as it slows down but it can take many miles of track to apply the brakes before finally coming to a complete stop for the momentum investor the best part of the train ride is in the middle when the train is moving at its highest velocity momentum investors like to chase performance they attempt to achieve alpha returns by investing in stocks that trend one way or another stocks trending up are referred to as hot stocks some are hotter than others as measured by growth over a period of time a stock that is trending down is cold 1investors can use momentum as a trading technique that seeks to profit from the herding behavior of market psychology rather than buy low sell high momentum trading follows a strategy of buy high sell higher once a momentum trader sees acceleration in a stock s price earnings or revenues the trader will often take a long or short position in the stock in the hope that its momentum will continue in either an upward or downward direction this strategy relies on short term movements in a stock s price rather than fundamental value 2