Momentum is the rate at which prices are changing. In technical analysis, momentum is often used to predict future price fluctuations in a security. It refers to how much inertia a market has, and whether or not it is trading significantly above or below its intrinsic value on any given day. Momentum traders believe that if an asset has shown a high level of price volatility over a considerable period of time, this is an indication that buying the asset now would yield high returns in the future.Momentum strategies keep an eye on the direction of a security's price and use trading decisions to determine how to profit from this trend. Momentum traders look for trends that are gaining steam by monitoring an indicator and then entering trades as these trends gain power.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. Momentum shows up in real time when the transactional volume of an asset rises because of increased sales.To the trader, momentum can be defined as either fast directional changes in price or "upward movement" with respect to an underlying security.Momentum trading is a way to actively trade price movements. The premise behind momentum trading is to spot certain moves in the underlying asset that indicate that the trend is being driven by a large group of traders and money managers. Momentum traders don't necessarily have stock picks and portfolio allocations, they're more into trading stocks than individual companies.
