Trading strategies
Momentum
Definition
Momentum is the tendency of stocks that have risen strongly to keep rising for a while, and of weak ones to keep falling. Investors often measure it over the past 3 to 12 months and traders over days or weeks, and sharp reversals are its main risk. Our momentum trading guide explains the approach.
Example
Suppose an investor ranks stocks by their 12-month return and holds the strongest, such as company XYZ, up 60% over that span. A short-term trader might instead look at a stock up 15% in two weeks. The main risk is a sharp reversal: if XYZ then drops 25% in a month, it ends only 20% above where it stood a year earlier.
Hypothetical numbers, for illustration only.
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.