Stock Market Glossary
Momentum
Speed and strength of a price movement.
In brief: Speed and strength of a price movement.
Meaning in practice
Momentum strategies buy stocks that have recently risen sharply and sell weak ones. The effect is well documented empirically, but is susceptible to sudden trend changes (“momentum crashes”), especially after extreme market phases.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
