- Momentum is the speed or velocity of price changes in a stock.
- Momentum shows the rate of change in price movement over a period of time to help investors determine the strength of a trend.
- Investors use momentum to trade stocks whereby a stock can exhibit bullish momentum–the price is rising
History has shown that momentum is far more useful during rising markets than falling markets because markets rise more often than they fall. In other words, bull markets tend to last longer than bear markets.
In the markets, some investors might get in and buy a stock too much early while the price is beginning or yet to accelerate higher.
Once the fundamentals kick in and it's clear to market participants that the stock has upward potential, the price takes off in god speed.
For momentum investors, the most profitable part of the ride is when prices are moving at a high velocity.
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