Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Market Momentum

What it is:

Market momentum is the perceived strength of a positive or negative change in market prices.

How it works (Example):

Market momentum is the ability of a market to sustain an increase or decrease in prices. Market momentum is a function of a price change during a specific period of time versus the trading volume during that period. In other words, high trading volume increases the market momentum of a price change and vice versa. For example, if the S&P 500 Index rises 100 between Monday and Tuesday in conjunction with heavy trading, the S&P is likely to sustain an upward trend in the days to come.

Why it Matters:

In technical analysis, anticipatory indicator gives a signal in advance of other market action. Momentum indicators such as RSI or stochastics are anticipatory indicators that technical analysts believe can be used to predict changes in price.